Release Date: June 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strong cash generation with a net cash position of ZAR 2.3 billion.
- Successful diversification strategy with significant contributions from both agriculture and mining sectors.
- Reduction in recordable case count, highlighting improved safety performance.
- Significant investments in ESG initiatives, including solar plants and reverse osmosis plants.
- Consistent return to shareholders, including ordinary and special dividends, and share buyback programs.
Negative Points
- Revenue down 16% due to a sharp decline in commodity prices.
- Underperformance in the Protea chemicals business, significantly impacting overall results.
- Challenges in the SADC agriculture business, particularly in Zambia and Zimbabwe.
- Ongoing regulatory and hyperinflation challenges in Zimbabwe affecting operations.
- High setup costs and initial losses in the Australian mining business.
Q & A Highlights
Q: On Australia, the mining business, what assets are you specifically looking to invest in and then what sort of CapEx would that require? And then how long do you think it'll be before you see some form of return?
A: We've already invested in plant and capacity in Australia, and we're doing trials with some customers. We're looking for a partner or investment that complements our explosives and blasting business. The balance sheet has the capacity to handle these investments, and we expect returns in the near term.
Q: Can you talk through the scenario planning on security of ammonia supply going forward?
A: We are concerned about the main supplier of ammonia in the country due to supply chain disruptions. However, we've managed to mitigate this by importing ammonia and using our rail tankers. We are also exploring other projects to ensure a sustainable supply.
Q: Are we at a point where this is normalized earnings through the cycle, or could you give more color even at the divisional level?
A: This year’s earnings are resilient despite headwinds. There are areas like the chemicals business and SADC agriculture where we could have done better. We expect an uptick in earnings from new initiatives in Canada, Indonesia, and Australia.
Q: What is the plan for the chemicals business going forward, and are the current margins still attainable?
A: We have enhanced our executive team and are optimizing the business from a cost and logistics perspective. We aim to reunite the business with certain suppliers and customers. We are not changing the margin guidance and are focused on getting the business back to where it should be.
Q: Could you help us understand how to look at CapEx, especially maintenance CapEx at a plant level?
A: We continuously do the required maintenance across our facilities, which is in the range of ZAR250 million. Our plants are younger and more modern compared to competitors, and we optimize our shuts based on market demand and production efficiencies.
Q: What would be a good outcome for the chemicals division in the year ahead?
A: On a normalized basis, the chemicals business should give us between ZAR150 million and ZAR200 million. We are focused on medium to long-term gains, even if it means taking short-term pain.
Q: What is the strategic imperative towards retaining the business in Zimbabwe, especially with regulatory and hyperinflation challenges?
A: Zimbabwe is a challenging market, but it’s close to us and provides significant benefits in agri and mining. We are reviewing our operating model and exploring options to ensure sustainable operations.
Q: Could you provide an idea of current losses being made in Australia? What is capacity utilization across the manufacturing assets, and where's the most upside potential?
A: In Australia, our AgriBio business is profitable and has about 50% capacity utilization. The mining business has setup costs resulting in losses, but we expect profitability as we ramp up operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
