earnings call presentation 2016 - maaden - homepage · earnings call presentation 2016 6 safety...

Earnings Call Presentation 2016 1

Earnings Call Presentation 2016 January 23, 2017


Walid Al-Hakim

Head Investor Relations


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.

Forward looking statement


Khalid Al-Mudaifer

President & Chief Executive Officer


Ma’aden continues to deliver despite challenging markets

Production growth across entire portfolio with leading cost performance ► 2,724 K tonnes of ammonium phosphate fertilizer, up by 3% y-o-y

► 1,229 K tonnes of ammonia, up by 15% y-o-y

► 1,440 K tonnes of alumina1

► 871 K tonnes of primary aluminium, up by 4% y-o-y

► 225 K ounces of gold2, up 37% y-o-y

Further improvement in cash costs across the business

Continue to generate strong cash from operations despite low commodity prices ► SAR 9,506 million of revenue, down by 13% y-o-y

► SAR 2,046 million of gross profits, down by 16% y-o-y

► SAR 3,683 million of EBITDA, up by 1% y-o-y

► SAR 401 million of net income3, down by 34% y-oy

Net cash generated SAR 2.2 billion in line with 2015 despite substantially lower prices

Confidence in our future with attractive opportunities to grow ► Ma‟aden continued to invest in growth projects with a capex of over SAR 8 billion, mainly in

Ma‟aden Wa‟ad Al Shamal Phosphate Company (MWSPC)

► MWSPC construction work continues to progress well and the ammonia plant started commercial

production on January 1, 2017

► The balance of plants expected to start up in the first half of 2017

► Ma‟aden announced plans to develop its third major phosphate project with an estimated cost of

SAR 24 billion by 2024 The numbers above are compared with 2015

1 Alumina quantity mentioned is for the whole year and not only for the commercial operation period

2 Gold quantity mentioned is commercial operation numbers and excludes volumes from Ad Duwayhi prior to April 1, 2016

3 Attributable to shareholders of the parent company


Safety ► Achieved zero fatalities in 2016

► LTIFR reduced by 35% to 0.03 in 2016

► Total recordable injury rate (TRIR) reduced by

24% to 0.25 in 2016

► Lost time injuries severity rate reduced by

about 35% to 0.56

► Behavioral safety improvement project (EHS 2

– “Zero Harm Culture”) launched & completed

Environment ► Continue to operate with zero environmental

violation

Community ► Continue to positively impact the people around

our operations

► Achieved 62% Saudization in 2016

► Ma‟aden continue to invest in various

community initiatives in different fields like

training and education, infrastructure

developments, community welfare initiatives

and other social investments.

Achieved significant progress in sustainability

Lost Time Injury Frequency Rate (LTIFR)

0.30

0.20

0.05 0.04 0.05 0.03

90% reduction in LTIFR

2011 2012 2013 2014 2015 2016

Ma’aden received Saafah Transparency

Award in 2016

55%

35%

9%

10% Infrastructure

Education & training

Community development

Other social investments

2016 Community Initiative Spends

Community spend figures are representative

percentages, final numbers will be published

in 2016 annual report


Delivering stronger margins despite price pressure

898

947 952

886

40%

37%

41%

37%

20%

25%

30%

35%

40%

45%

750

800

850

900

950

1000

Q1 2016 Q2 2016 Q3 2016 Q4 2016

EBITDA

EBITDA Margins

SA

R m

illio

n

Rebase t

o 1

00 a

s o

n 4

Jan 2

016

Source: Bloomberg

Commodity price movement

EBITDA and margins

40.00

60.00

80.00

100.00

120.00

140.00

4-Jan-16 4-Mar-16 4-May-16 4-Jul-16 4-Sep-16 4-Nov-16

Aluminium

Copper

Gold

DAP

Ammonia


Average DAP Price Tampa Index (US$/t)

300

350

400

450

500

1-Jul-16 1-Jul-15 1-Jan-16 1-Jan-15 1-Oct-16 1-Apr-15 31-Dec-16 1-Apr-16 1-Oct-15

2015

► In 2016 phosphate market was under strong pressure

− Prices for DAP dropped by ~30% compared 2015,

reaching lowest since 2009

− Factors like low input costs, seasonally weak

demand, new capacities and low demand in

domestic Chinese market moved prices to its lows

► Demand and supply

− Indian imports reduced by ~20% in 2016 vs 2015

− However, the demand in Brazil, Argentina, and

USA remained healthy

− Additional capacities commissioned by OCP

− H2 2016 saw some reduction in supply from China

► Momentum of recovery avail, however pressure

remains

− Local demand in China has picked up and this will

reduce some supply in international market until

late Q1

− Additional supplies, reduction in subsidy by India

and export tax removal from china would exert

further pressure on prices

Source: Ma’aden SBU analysis, CRU , FMB and FERTECON

► Ammonium phosphate fertilizer price averaged - US$346/tonne (Tampa FOB Index) and ammonia price averaged

- US$ 268/tonne (Middle East FOB Index)

► Ma’aden continued to invest in growth projects with a capex of over SAR 8 billion, mainly in Ma’aden Wa’ad Al

Shamal Phosphate Company (MWSPC). The construction work continues to progress well and the ammonia

plant started commercial production on January 1, 2017

► Ma’aden announced plans to develop third phosphate project with an estimated cost of SAR 24 billion by 2024

Phosphate market struggled in 2016

2016


Aluminium recovered in 2016

► Aluminium market in 2016 showed improvement

− LME prices rallied in 2016 slightly as world

average cash costs have started increasing due to

high alumina and coal prices, pushing prices

− US announcing infrastructure

► Demand and supply

− Demand growth will range from 2.7% to 4% in

2017, in-line with the level of growth in 2016.

− Global market balance is progressing better than

expected as CRU and other analysts are

expecting global primary metal balances to be in

deficit from 2018

► 2017 needs a close watch

− Increased input prices like alumina and coal may

bring some closures as per CRU

− CRU expects floor price at US$ 1,600/t

− Positives like recent US trade policy limiting

Chinese exports, higher US spending & inflation

may support prices in spite of weak fundamentals

in China

► Aluminium price averaged - US$1,584/tonne (LME) and the premiums remained stable at US$ 90-100 / tonne

(Japanese benchmark) in 2016

► Ma’aden Bauxite and Alumina Company achieved a major milestone by starting commercial operations on

October 1, 2016; this completes Ma’aden’s integrated value chain from ‘mine to metal’

► The rolling mill operation continues to ramp up production and is making solid progress in penetrating the

market for can sheets in the Middle East region and beyond.

1000

1200

1400

1600

1800

2000

2200

2-Jan-15 2-Apr-15 2-Jul-15 2-Oct-15 2-Jan-16 2-Apr-16 2-Jul-16 2-Oct-16

2015 2016

Aluminium Price Movement (US$/t)

Source: Ma’aden SBU analysis, CRU Dec 2016, Harbor Dec 2016


Gold and copper

► Gold production reached a new record with sales up 50% year over year due to the new addition of Ad-Duwayhi

mine

► We continue to aim for 500,000 ounces of gold production

► Our first copper mine, Jabal Sayid, entered commercial production on 1 July 2016 and produced almost 27,000

tonnes in its first year, ahead of targets

► Gold prices rose 9% due to large ETF inflows

► Gold price 2017 has rebased at circ $1,200

showing signs of improvement from the beginning

of the year

► US Federal Reserve is expected to continue to

increase interest rates which resulted in gold

price dip at the end of Q4 2016

► Copper prices have strengthen considerably

during Q4 to ~ $2.60 per lbs at the back of

Chinese buying and US announcing to re-invest

in the infrastructure

Gold and copper price movement

60

70

80

90

100

110

120

1-Jan-15 1-Apr-15 1-Jul-15 1-Oct-15 1-Jan-16 1-Apr-16 1-Jul-16 1-Oct-16

Copper

Gold

US$/t

US$/oz

2015 2016

Rebase t

o 1

00 a

s o

n 1

Jan 2

015


Wa‟ad Al Shamal

8.0 6.6

1.4

Total Capex Current

Unspent

Already

spent

Wa’ad Al Shamal project capex (US$ billion)

Project update

► Three major projects successfully achieved

commercial operations during 2016: Ad

Duwayhi gold mine, Jabal Sayid copper

mine, and the Al Ba’itha bauxite mine and

alumina refinery in Ras Al Khair

► Wa’ad Al Shamal construction work

continues to advance and the first plant, for

the production of ammonia, started

commercial production on January 1, 2017

► The aluminium rolling mill continues to

steadily progress towards achieving

commercial production


Darren Davis

Chief Financial Officer


1,514

5,576 6,047

10,791 10,956

9,056

788

2,816

1,784

3,595 3,644 3,683

2011 2012 2013 2014 2015 2016

Revenue

EBITDA

Financial performance

Particulars (SAR millions) 2016 2015 % Ch

Revenue 9,056 10,956 -13%

EBITDA 3,683 3,644 1%

Margin 40% 33%

Net Income1 400 605 -34%

Net Cash from operations 2,189 2,214 -1%

EPS 0.32 0.52

Ma’aden has demonstrated a solid

performance in the past few years given

the downturn in the commodity market.

► Revenues fell 13% y-o-y to SAR 9,056

mainly attributed to the fall in ammonia,

ammonium phosphate and aluminium by

30%, 31% and 7% respectively, despite

the increased volumes and reduced costs

► Positive EBITDA and increased EBITDA

margin, driven by strong operating

performance and reflecting benefits from

our cost optimization

► Net income reduced by 34% mainly on

account of lower revenue, increased

financial charges and commercialization of

Ad Duwayhi gold mine, Jabal Sayid

copper mine, Al Ba‟itha bauxite mine and

alumina refinery

► Ma‟aden has initiated several measures to

respond lower commodity prices to

continue to operate in positive cash flow

generating a strong cash flow of SAR 2.19

billion for 2016

1 Net income reported is attributed to shareholders.

All numbers are in SAR millions


50%

43%

7%

44%

45%

11%

62%

34%

4%

40%

50%

10%

2015 2016

SR 10,956m SR 9,506m

SR3,644m SR 3,683m

Revenue

E

BIT

DA

Segment performance

► Ma‟aden benefited from its

diversified portfolio

► Increasing productivity, higher

volumes and reduction in cost

across all our production facilities

helped reduce the losses from lower

commodity prices

► Aluminium segment increased its

contribution significantly to the

EBITDA from 34% to 50% in 2016 at

the increased efficiency, better cost

performance and 100% alumina

from its own refinery

► Precious metals revenue increased

from 7% to 11% mainly at the back

of increased contribution from our

new mines Ad Duwayhi and Jabal

Sayid

► Given the challenging environment,

Ma‟aden continue to operate at the

similar levels of earnings before

interest, depreciation and taxes

*precious metals represent gold and copper


Net income

808

-2,095

866

837 122

115 93

-47

-375

18 61 401

Net

income

2015

Net

income

2016

Price

effect

Volume

effect

Cost

effect

Sales,

mktg. &

log.

G&A Explo. &

tech. serv.

Finance

charges

Share of

loss in

JVs

Others Write-off

of PPE

Net income reduced due to the lower commodity prices and higher financial charges; this was

largely offset by the increase in volumes and reduction in costs

Negative impact on net income

Positive impact on net income


Operational performance


Phosphate performance


► 2016 remained a historic year for Ma‟aden Phosphate

Company with record production and sales of

ammonium phosphate fertilizer of 2,724 K tonnes and

2,676 K tonnes respectively. Ammonia production and

sales were also highest ever at 1,229 K tonnes and 715

K tonnes respectively in 2016.

► The record production and sales volume is largely

attributed to the extensive operational excellence drive

as a part of the strategic initiative.

Cost performance

► During the year, our ammonium phosphate fertilizer

cash cost reduced by nearly 17% as compared to

previous year. The reduction in cost was primarily

driven by lower input costs, better efficiencies and

operational leverage

Commodity price movement

► In 2016 realized prices for DAP and ammonia dropped

by more than 30% as compared to 2015 mainly on

account of low input costs, weak demand, additional

supplies which pushed the prices to its lowest since

2009

659 669 708 687

599

705 672

700

329 332 335 297

Q1 2016 Q2 2016 Q3 2016 Q4 2016

Production

Sales

DAP Avg Prices

304 300 312 313

206

154 151

204

355

400

314

173

Q1 2016 Q2 2016 Q3 2016 Q4 2016

ProductionExternal SalesAmmonia Avg Prices

Ammonium phosphate

fertilizer

Ammonia

(Kt)

(Kt)

(US$/t)

(Kt)

(Kt)

(US$/t)


Aluminium performance


► During the year, Ma‟aden Aluminium Company produced

and sold 871 K tonnes of primary aluminium, an increase

of 4%, as compared to the previous year. The increase is

mainly due to increased production efficiency and higher

volumes from the can recycling facility.

Cost performance

► During the year, our aluminium cash cost reduced by

more than 20% compared to previous year, due to

increased volumes, decreased fixed costs through strong

cost control measures, reduction in some of the raw

material consumptions, and lower input costs, notably

the lower price of alumina.

Projects ► The bauxite mine at Al Ba‟itha and alumina refinery at

Ras Al Khair achieved a major milestone with the

achievement of commercial operations on October 1,

2016; The Alumina refinery is operating well and had

already achieved up to 90% of its nameplate production

capacity by the end of the year.

► The rolling mill operation continues to ramp up

production and is making solid progress in penetrating

the market for can sheets in the Middle East region and

beyond.

Primary aluminium

128 130

110

135

0

20

40

60

80

100

120

140

160

Q1 2016 Q2 2016 Q3 2016 Q4 2016

Corporate aluminium sales (Kt)

217

220

216

219

215

219

216 216 1,503

1,550

1,621

1,663

1,400

1,450

1,500

1,550

1,600

1,650

1,700

212

213

214

215

216

217

218

219

220

221

Q1 2016 Q2 2016 Q3 2016 Q4 2016

Production (Kt)

Sales (Kt)

Avg LME prices (US$/t)


Gold and copper performance

Gold

Copper

4

5

7

8

5

6

10

5

-

2

4

6

8

10

12

Q1 2016 Q2 2016 Q3 2016 Q4 2016

Production

Sales


► Production and sales of gold during 2016 increased by

38% and 36% respectively to 225 Koz compared to last

year. This was mainly due to increased volumes from Ad

Duwayhi mine, Ma‟aden‟s largest gold mine, which was

commercialized on April 1, 2016.

► The increased production and sales volume is largely

attributed to the reliable operations base and further

optimization of Ma‟aden‟s production facilities, were in our

team is working towards achieving excellence in both

operations and sales to achieve optimal results

► We produced and sold 13.45 K tonnes and 12.4 Ktonnes

of copper in 2016 1

► Production of Jabal Sayid is progressing very well with 10

of the 10 planned copper concentrate shipments for the

year.

Commodity price movement ► Gold prices and copper improved very well during the

year as compared to 2015

44

60

57

64

40

63

57

64

1,192

1,269

1,328

1,182

1,100

1,150

1,200

1,250

1,300

1,350

-

10

20

30

40

50

60

70

Q1 2016 Q2 2016 Q3 2016 Q4 2016

Production

Sales

Gold Avg Prices

(Koz)

(Koz) (US$/oz)

(Kt)

(Kt)

1 Ma’aden attributable production & sales @ 50%


Financial position


All numbers are in SAR millions

6,8

97

51,2

23

3,0

09 8,2

45

27,6

99

Current

Liability

17%

28%

38%

17%

MPC WAS Aluminium Others

66%

29%

5%

Banks PIF SIDF

Long term borrowing

By product By source

11,6

25

48,8

88

34

,637

1,9

23

Capital work

in progress

Plant, property

& equipment

Current assets

Other non

current assets

Equity

Long term

borrowing

Other non current

liability

Assets Liability

As on 31 December 2016

Balance sheet

95%

5%

Floating Fixed

47%

53%

SAR USD

Type of loan

Financial position

Non controlling

interest


9 4

12 5

11 8 10 7

27 33 45 45

53 53 56 54

5 year historical data

Cash equivalents and short term investments

Long term borrowings

Debt/total capital ratio

Net debt 2

54%

57% 57%

56%

60%

2012 2013 2014 2015 Q2-16

18 29 33 40 45

Q1-16

61%

42

Q3-16

60%

46

60%

47

Q4-16 1 Long term borrowings / (long term borrowings + total equity)

2 Long term borrowings – cash equivalents and short tern investments

Financial strategy

1

► Maintain liquidity

► Optimizing capital structure

► Evaluating options to expand debt sources


Production growth and cost optimization substantially mitigating price drops

► Continue to increase production across our business

► Complete the construction of MWSPC plants

► Continued focus on generating free cash flow

► Remain committed to optimize operating costs and capex across all affiliates

Commodity prices expected to remain subdued

► Prices for aluminium have improved but not clear that the recovery is sustainable or that the

recovery trend will continue

► Phosphate prices remain soft due to low input costs, more supply and slower than expected

demand from India and recovery may be slow

Ma’aden is well positioned

► To benefit from improvements in prices

► Continue to build our large scale business with ongoing project completions

► Play a key role in The Kingdom‟s Vision 2030 plan for mining

Summary


Q&A


Appendix


0

500

1000

1500

2000

2500

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

MIC

MGBM

WAS

MBAC

MRC

MAC

MPC

633

873

998

1,132

1,269

1,712

2,067

1,198

1,321

1,631

806

575 575

288

Debt repayment profile

Al numbers are in US$ million

As on 31 December 2016


Particulars Q4

2016

Q4

2015

%

change

y-o-y

Q3

2016

%

change

q-o-q

2016 2015

%

change

y-o-y

Phosphate business

Ammonium phosphate

fertilizer („000 tonnes) 700 746 -6% 672 4% 2,676 2,633 2%

Ammonia („000

tonnes) 204 143 43% 151 35% 715 461 55%

Aluminium business

Primary Aluminium

(„000 tonnes) 216 220 -7% 216 -6% 871 839 4%

Golds and base

metals business

Gold („000 ounces) 64 42 52% 57 12% 225 165 36%

Copper („000 tonnes) 5.2 2.4 116% 9.9 -48% 24.8 2.4

Sales summary

earnings call presentation 2016 - maaden - homepage · earnings call presentation 2016 6 safety...

Documents