Investor Briefing 31 03 2009 Briefing 31 03 2009.pdfGROUP INCOME STATEMENT FOR THE YEAR ENDING...
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INVESTOR BRIEFING MARCH 2009 Welcome Audited Results 2008 Divisional Performance Recent Photos Strategic Focus - Cement Industry Capital Requirements & Financial Projections 2009 - 2014
Transcript of Investor Briefing 31 03 2009 Briefing 31 03 2009.pdfGROUP INCOME STATEMENT FOR THE YEAR ENDING...
INVESTOR BRIEFINGMARCH 2009
� WelcomeWelcome
� Audited Results 2008
� Divisional Performance
� Recent Photos
� Strategic Focus - Cement Industry
� Capital Requirements & Financial Projections
2009 - 2014
AUDITED RESULTSst31st DECEMBER 2008
GROUP INCOME STATEMENTFOR THE YEAR ENDING DECEMBER 31, 2008
31.12.2008 31.12.2007 %
Ksh M Ksh MKsh M Ksh M
Turnover 4,619 3,882 19%
EBITDA 1,172 992 18%
Profit before Tax 705 621 14%
Taxation 202 199 2%
Profit After Tax 503 422 19%
EPS Ksh 5.08 4.26 19%
GROUP BALANCE SHEETAS AT DECEMBER 31, 2008
31.12.2008 31.12.2007
ASSETS Ksh M Ksh M
Non Current Assets 4,479 3,322Non Current Assets 4,479 3,322
Current Assets 1,873 1,183
TOTAL ASSETS 6,352 4,505
EQUITY AND LIABILITIES
Capital & Reserves 2,127 1,772
Non Current Liabilities 2,382 1,667
Current Liabilities 1,843 1,066
TOTAL EQUITY & LIABILITIES 6,352 4,505
2,606
3,882
4,619
4000
5000
GROUP TURNOVER Ksh M
890 884 1,126 1,240
1,640
2,224
2,606
0
1000
2000
3000
2000 2001 2002 2003 2004 2005 2006 2007 2008
NET PROFIT Ksh M
422
503
400
500
600
357 20 30 34
5797
116
200
265
0
100
200
300
400
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
EARNINGS PER SHARE Ksh M
4.26
5.08
4.00
6.00
0.400.62
1.041.25
2.10
2.76
4.26
0.00
2.00
4.00
2001 2002 2003 2004 2005 2006 2007 2008
DIVIDENDS PER SHARE Ksh M
1.00
1.25 1.25
1.25
1.50
0.20
0.400.50
0.40
0.75
0.00
0.25
0.50
0.75
1.00
2001 2002 2003 2004 2005 2006 2007 2008
DISTRIBUTION OF WEALTH
Remuneration to Staff
Dividends to Shareholders
7% Govt Taxes11%
WEALTH CREATED to Staff27%
Banks -Financing Costs9%
To Retain & Expand Company46%
WEALTH CREATED IN 2008Ksh. 1.62 Billion
Ksh M
Cash Generated from Operations 1,019
Net Increase in Borrowings 781
GROUP CASH FLOW STATEMENTFOR THE YEAR ENDED DECEMBER 31, 2008
Increase in Trade/Other Payables 348
Total Sources 2,148
Dividend Paid 116
Interest Paid 154
Increase in inventories and spares 230
Increase in Trade/Other Receivables 530
Capital Expenditure 1,151
Total Applications 2,181
Decrease in Cash & Cash Equivalents 33
EBITDA IN Ksh M
992
1172
1000
1500
124 102 131 152 133 161 180
272
410
509
992
0
500
1000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
466
558
400
500
600
LOAN REPAYMENT SCHEDULE Ksh M
344 329310 302
0
100
200
300
400
2009 2010 1011 2012 2013 2014
GROUP NET DEBT Ksh M
1,887
2,700
2000
3000
115 105 95187
362
1,106
1,628
0
1000
2000
2000 2001 2002 2003 2004 2005 2006 2007 2008
FIXED ASSETS Ksh M
3,1983,322
4,480
4000
5000
1,271 1,2611,415
1,575
2,0262,182
3,198
0
1000
2000
3000
2000 2001 2002 2003 2004 2005 2006 2007 2008
TOTAL ASSETS Ksh M
4,2544,505
6,352
4500
5500
6500
1,0451,178 1,234 1,271 1,261
1,4151,575
2,026
3,238
-500
500
1500
2500
3500
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
DEBT TO EQUITY & DEBT TO TOTAL ASSETS
IMPROVING COVERAGE RATIOS
179
150
200
Debt/Equity
13
24
35
115
99
127
8 15 20
45
58
39 42
0
50
100
150
2002 2003 2004 2005 2006 2007 2008
Debt/Total Assets
%
KEY FINANCIAL RATIOS DECEMBER 31st 2008
2008 2007
Interest Cover 5.6 X 4.7 XInterest Cover 5.6 X 4.7 X
Operating Cash Flow to Total Debt 23% 49%
Net Profit Margin 11% 11%
Post Tax Return on Capital Employed
13.4% 14%
Long Term Debt to Capital Employed 77% 64%
Total Debt to Equity 1.27:1 0.99:1
2002 2003 2004 2005 2006 2007 2008
Short Term A2 A1- A1 A1 A1 A1 A1
CREDIT RATING
SHORT TERM A1 : Highest certainty of timely payments,
liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor.
LONG TERM A : Good investment Grade, indicating high credit quality, good protection factors, risk factors are small and variable due to economic cycles
Short Term A2 A1- A1 A1 A1 A1 A1
Long Term A- A A A A A A
DIVISIONAL DIVISIONAL PERFORMANCE AND STRATEGY REVIEW
EUROPE•ITALY
MIDDLE EAST•UAE•OMAN•SYRIA•YEMEN
AFRICA
ARM EXPORT DESTINATIONS
AFRICA•EAST AFRICA (EAC)•EGYPT•SUDAN•DRC•ZAMBIA•MOZAMBIQUE•MAURITIUS•SOUTH AFRICA•ANGOLA•NAMIBIA•GHANA•NIGERIA
US$ AND KSH TURNOVER2008
Exports Sales
Local SalesKsh 3.443 B
74%
SalesUS$ 14.7 M Ksh1.176 B
26%
TOTAL SALES Ksh 4.619 B
DIVISIONAL TURNOVER 2008
Sodium
Fertiliser10%
Cement50%
Minerals10%
Lime8%
Sodium Silicate22%
TOTAL TURNOVER Ksh. 4.6 B
DIVISIONAL TURNOVER 2008
Fertilizer10%
2008Fertilizer
8%
2007
Cement50%
Minerals10%
Lime8%
Sodium Silicate22%
Cement54%
Minerals9%
Lime7%
Sodium Silicate22%
TOTAL TURNOVER Ksh. 3.8 B
TOTAL TURNOVER Ksh. 4.6 B
FERTILIZER DIVISION
� Focus on large scale farmers and institutional buyers
� Strengthening distribution network and brand awareness
� Target to achieve a 12% market share in Kenya = Ksh 2 B sales
TURNOVER BY DIVISION FERTILIZER Ksh M
316
467
400
500
7
48
160 154
316
0
100
200
300
2003 2004 2005 2006 2007 2008
TURNOVER BY DIVISION SILICATE Ksh M
752
846
973
800
1000
71 64
101 183
212
433
0
200
400
600
2000 2001 2002 2003 2004 2005 2006 2007 2008
TURNOVER BY DIVISION LIME Ksh M
309
362
285
346
300
400
104 110
175152
227
285
0
100
200
300
2000 2001 2002 2003 2004 2005 2006 2007 2008
TURNOVER BY DIVISION MINERALS Ksh M
339
438
400
500
119145
182216
288319 331 339
0
100
200
300
2000 2001 2002 2003 2004 2005 2006 2007 2008
TURNOVER BY DIVISION CEMENT Ksh M
1,9712,219
2000
2500
594 566667 683
864 901
924
0
500
1000
1500
2000 2001 2002 2003 2004 2005 2006 2007 2008
ARM BCL EAPCLTanga Cement PPC
Turnover 100 100 100 100 100
COMPARATIVE INCOME STATEMENT ARM – BCL – EAPCL-PPC(SA)- 2008
ACTUALS BASED AS PERCENTAGE
Turnover 100 100 100 100 100
Operating Profit 27 22 13 35 37
Finance Cost 10 1 26 0 3
Profit Before tax 17 18 -13 36 36
Tax 5 5 3 11 12
Profit After Tax 12 13 -10 25 24
POWER CONSUMPTION KWH PER TON OF CEMENT PRODUCED IN 2008
116.49120
125
130
116.49
95.67
90
95
100
105
110
115
120
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
18% Reduction in Energy Consumption
TANZANIA CEMENT PROJECT
1.5 million tons per year
4,500 tpd Clinker& Cementplant at Tanga
2,500 tpd Cement Grinding Plantat Dar Es Salaam
Tanga
Dar Es Salaam
ELEVATION OF CLINKER PLANT
STRATEGIC FOCUSSTRATEGIC FOCUS
THE CEMENT INDUSTRY
Cement Division
THE ARM THE ARM
ENGINE OF
GROWTH
�CEMENT NOW CORE BUSINESS
ARM CEMENT BUSINESS
�CEMENT DIVISION INTERNATIONALLY BENCHMARKED TO COST, QUALITY AND TECHNOLOGY, AND PLANT MANAGEMENT
ARM’S STRENGTHS� Strong engineering team which has built world class cement plant at costs which are substantially lower than international cost per ton of capital outlayof capital outlay
� Strong project team which ensured that the project was completed in a period of 21 months
� Strong operations and process team which ensure that clinker and cement is manufactured to international quality and cost bench marks
� Strong management team, with proven track record in commercial functions, customer relationships, distribution and logistics, and financial controls
� ALMOST ENTIRE AFRICA UNDER GOING A RESURGENCE IN ECONOMIC GROWTH
MORE SPECIFICALLY EAST, CENTRAL,
AFRICA CEMENT MARKETS
� MORE SPECIFICALLY EAST, CENTRAL, AND SOUTHERN AFRICA CEMENT CONSUMPTION GROWTH AROUND 15% pa OVER PAST 5 YEARS AND PROJECTED TO CONTINUE
� CEMENT GROWTH GENERALLY TWICE THE UNDERLYING GDP GROWTH RATE
UGANDA
300,000 tpa
Clinker & Cement
Imports into
Africa 2007
SudanSUDAN
1,500,000 tpa
RWANDA
150,000 tpa
Uganda
TANZANIA
200,000 tpa
KENYA
300,000 tpa
300,000 tpa150,000 tpa
ENTIRE REGION IS NET IMPORTER OF CEMENT
ANGOLA
800,000 tpa
MOZAMBIQUE
500,000 tpa
SOUTH AFRICA
2,000,000 tpa
480
620
500
600
700
2006 INDUSTRY DATA
PER CAPITA CEMENT CONSUMPTION IN AFRICA ON THE RISE
40 4565 70
225
380
480
0
100
200
300
400
500
Uganda Tanzania Kenya Mauritius S Africa Egypt China Japan
KGS
PER CAPITA CONSUMPTION v GDP
700
800
900
Greece.Spain
Israel
Italy
0
100
200
300
400
500
600
0 5000 10000 15000 20000 25000 30000
Rom
Mor.
Mex.
Italy
Switz
Germ
USAFrance
FinlandSouth Africa .
Nigeria East Africa
Turk
Tunisia
Egyp
ANNUAL PER CAPITA GDP
EAST AFRICA – MARKET SNAPSHOT 2000 - 2014
� East African Cement market grown by 16% pa
over last 10 years
� East African market is expected to double over
next five years from 5.5 mtpa 11.0 mtpa by 2012
� Investments into new capacity slow and market
would still be deficient even if all the new
capacities which have been announced come on
stream
KENYA CEMENT DEMAND EVOLUTION 1999 - 2014
3300
3400
37504100
3,600
4,100
900
1,100
1,150
1,250
1,3501,500
1,800
1,950
2,300 2,500
2,783 3000
3400
600
1,100
1,600
2,100
2,600
3,100
TREND LINE 16% GROWTH
TANZANIA CEMENT DEMAND EVOLUTION 1999 – 2014
3000
3300
3600
2,900
3,400
700 800900
1,000
1,1501,250
1,375 1,550
1,750 2,000
2200 2400
26503000
400
900
1,400
1,900
2,400
2,900
TREND LINE 14% GROWTH
EAST AFRICAN REGION CEMENT DEMAND PROJECTION 2007-2014
10,600
11,650
10,500
11,500
6,000 6,600
7,250
7,950
8,7509,650
5,500
6,500
7,500
8,500
9,500
10,500
2007 2008 2009 2010 2011 2012 2013 2014
8000
10000
15% growthGreen Box Shows Deficit
KENYA CEMENT CAPACITY AND PROJECTED DEMAND
2000
4000
6000
5% growth
10% growthCAPACITY ‘000 TPA
Installed And Projected
New Capacity
14000
16000
18000
15% growth
KENYA + UGANDA CEMENT CAPACITY AND PROJECTED DEMAND
Green Box Shows Deficit
4000
6000
8000
10000
12000
14000
5% growth
10% growthCAPACITY ‘000 TPA
Installed And Projected
New Capacity
COMPETITIVE SCENARIO
� HIGH CEMENT DEMAND BUT LOW LOCAL CAPACITY
� IMPORTS OF FINISHED CEMENT DIFFICULT� IMPORTS OF FINISHED CEMENT DIFFICULT
� QUICK FIX OPTION TO IMPORT CLINKER (SEMI FINISHED CEMENT)
� NEW PROJECTS FOR CLINKER GRINDING BY EAPC, TORORO CEMENT, AND OTHERS
� HOWEVER, CLINKER GRINDING NOT COMPETITIVE IN LONG RUN
Economics Of Imported Clinker Current ARM Cost = 100
LOCAL MANF
COST
IMPORTED
CLINKER
%
HIGHERCOST
Ex Factory / FOB 100 64
Freight - 36
Duties - 10
Port Charges - 26
Clearing, Fwd.& Storage - 14
Transport to Nairobi 50 50
TOTAL COST 150 200 33%
STRATEGIC FOCUS
THE CEMENT INDUSTRYTHE CEMENT INDUSTRY
WHAT NEXT FOR ARM?
ARM CAPACITY INCREASE 2009
�DOUBLING PRESENT CAPACITY TO 600,000 TPA, CAPACITY OPERATIONAL 600,000 TPA, CAPACITY OPERATIONAL IN 2010
�NEW 1.5 M TONS CEMENT PLANT IN TANZANIA
Tororo14%
Others2%
% MARKET SHARE KENYA 2012
ARM12%
% MARKET SHARE KENYA 2007
Bamburi54%
EAPC16%
ARM14%
Bamburi58%
EAPC30%
Twiga14%
% MARKET SHARE EAST AFRICA -2007
Twiga14%
% MARKET SHARE EAST AFRICA-2012
Bamburi
46%
EAPC14%
ARM5%
Tororo8%
Tanga Cement13%
14%
Bamburi
36%
EAPC7%ARM
20%
Tororo14%
Tanga Cement9%
COMBINED INDUSTRY CAPACITIES IN KENYA-TANZANIA-UGANDA
EXISTING2007MTPA
PROPOSED2014MTPAMTPA MTPA
KENYA 2,500 5,350
TANZANIA 1,550 2,700
UGANDA 700 1,700
TOTAL 4,750 9,750
Capital Requirements &
Financial Projections Financial Projections
2009 - 2014
ARM ORGANIZATION STRUCTURE
ARM(HOLDING COMPANY)
ARM(HOLDING COMPANY)
ARMSAARM T
MAVUNO FERTILIZERS LTD
ARM MINERALS LTD
ARMCEMENT
MAVUNO FERTILIZERS
ARM MINERALS & CHEMICALS
ARM FUNDING STRUCTURE FOR CAPITAL EXPANSION
ARMHOLDING COMPANY
New Equity and or debt
injection into cement
Existing Debt
CEMENT SUBSIDIARY
TANZANIA CEMENT
OTHERSCEMENT
MINERALSSUBSIDIARY
FERTILIZERSUBSIDIARY
cement business
Note: New Debt ring fenced in Tanzania
FUNDING REQUIREMENTS AND DEBT SCHEDULE (Ksh M)
2009-2014
2009 2010 2011 TOTAL
Kenya2,772 2,772
KenyaFullyfunded
2,772 2,772
Cement Project Tanzania
2,000 4,000 2,000 8,000
TOTAL Ksh M 4,772 4,000 2,000 10,772
DEBT REPAYMENT SCHEDULE (Ksh M)2009-2014
2009 2010 2011 2012 2013 2014
KenyaRepayment
628 324 316 312 400 400
Tanzania - - - 1,000 1,000 1,000
Tanzania Repayment - - - 1,000 1,000 1,000
Total Repayment 628 324 316 1,312 1,400 1,400
KenyaOutstandingDebt
2,772 2,144 1,828 1,512 1,200 800
TanzaniaOutstanding Debt
2,000 6,000 8,000 7,000 6,000 5,000
TOTAL Debt Outstanding 4,772 8,144 9,828 8,512 7,200 5,800
PROJECTED TURNOVER
Ksh13.4B
Ksh16.1B Ksh16.8B
15000
20000
USD 201 M
USD 210 M
Ksh4.7B
Ksh6B
Ksh10B
Ksh13.4B
0
5000
10000
15000
2009 2010 2011 2012 2013 2014
USD59 MUSD 75 M
USD 125 M
USD 168 M
USD 201 M
PROJECTED EBITDA
Ksh4.32B
Ksh5.2BKsh5.4B
6000
USD65MUSD68M
Ksh1.2B
Ksh1.44B
Ksh2.9B
0
2000
4000
2009 2010 2011 2012 2013 2014
USD15M
USD18M
USD36M
USD54M
PROJECTED PROFIT AFTER TAX KSH BILLION
Ksh1.68B
Ksh2.05BKsh2.25B
2000
2500
USD26M
USD28M
Ksh0.5B
Ksh0.72B
Ksh1.22B
0
500
1000
1500
2009 2010 2011 2012 2013 2014
USD6.25MUSD9M
USD15M
USD21M
USD26M
PROJECTED EPS KSH
16.8
20.522.5
20
25
5.2
7.3
12.2
16.8
0
5
10
15
2009 2010 2011 2012 2013 2014
PROJECTED TURNOVER AND PROFIT (Ksh M) 2009-2014
2009 2010 2011 2012 2013 2014
Revenues:KenyaTanzania
4,700-
6,000-
7,0003,000
7,4006,000
7,6008,500
7,8009,000Tanzania
Total-
4,700-
6,0003,000
10,0006,000
13,4008,500
16,1009,000
16,800
EBITDA:KenyaTanzaniaTotal
1,200-
1,200
1,440-
1,440
1,9001,0002,900
2,3202,0004,320
2,4002,8005,200
2,4803,0005,480
PAT:KenyaTanzaniaTotal
520-
520
725-
725
850375
1,225
925750
1,675
1,0001,0502,050
1,1001,1502,250
EPS 5.2 7.3 12.2 16.8 20.5 22.5
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