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Audited group results for the year ended 30 June 2005 Targeting construction in the developing world supported locally by steel and cement Building sustainable value

Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

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Page 1: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Audited group resultsfor the year ended 30 June 2005

Targeting construction in the developing worldsupported locally by steel and cement

Building sustainable value

Page 2: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Who are we?

• Previously Anglovaal Engineering – hence “Av-eng”

– South African born and bred with 115 years in construction

– Separately listed on the JSE in 1999

• Activities focused around three clusters

– Construction - mining, energy and heavy infrastructure client focus

– Steel & Allied – steel and concrete products for the motor, manufacturing, mining and construction sectors

– Cement - cement, quarry products and ready mixed concrete

• Working in 40 countries and providing 29 000 direct jobs

• Listed in the JSE’s SRI Index since inception two years ago

Page 3: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Corporate objectives

• Return on average equity - 13,4%

– 0,5% short of target of “10% real return”

• Headline earnings per share - 69% growth

• Net debt/equity ratio - 40%

– versus 54% a year ago

– versus 35% target

Page 4: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Highlights

• An about turn in Construction

– Grinaker-LTA : Losses reduced from R126m to R18m

– McConnell Dowell : Operating profit of R55m

• Strong performance from Steel & Allied

– Trident Steel : Automotive industry

– Grinaker-LTA Manufacturing : Residential market

• Outstanding results from Cement

– Perfectly timed 500 000 tons of capacity

– Excellent operational performance

• All suspensive conditions met in BEE transaction with TisoGroup and other broad based empowerment partners

• Successful placement of a seven year R1bn convertible bond with coupon of 6.125%

Page 5: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Financial ReviewDennis Gammie

Page 6: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Financial performance

-(R19m)R72mTaxation

+0,51,9%2,4%Operating margin

+6414 cents23 centsDividends

+69R216mR364mHeadline earnings

(22)R214mR167mNet finance costs

+44R227mR327mOperating Income

+15R11,7bnR13,5bnRevenue

% ChangeJune 2004June 2005

Page 7: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Key ratios

(26)5440Net Debt : Equity ratio (%)

-4,04,0Dividend cover (times)

+42,62,7Asset Turnover (times)

+802,03,6Interest Cover (times)

+439,914,2Return on average capital employed (%)

+658,113,4Return on average equity (%)

% Change

June 2004

June 2005

Page 8: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Background issues

• IAS 17: Leases results in new interpretation for operating leases

• IAS 17: Leases also resulted in reclassifications

• IFRS 3: Business Combinations discontinues amortisation of

goodwill

• Seven year convertible bond issued with 6,125% coupon

Page 9: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

SA Construction

+4 1.9 2.0 Asset turnover

+13 3 037 3 427 Assets

+88(2.4%)(0.3%)Operating margin

+86(126)(18)Operating Profit

+20 5 657 6 765 Revenue

% ChangeJune 2004June 2005Rm

•Loss from JV’s and construction associates of R33m (loss of R37m in 2004)

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Australia & SE Asia Construction

(9)2.52.3Asset turnover

+2772787Assets

(146)(2.6%)(6.5%)Operating margin

(129)(51)(117)Operating Profit

(7)1 9281 796Revenue

% ChangeJune 2004June 2005Rm

•Profit from JV’s and construction associates of R17m (profit of R18m in 2004)

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Steel & Allied

+6 1.5 1.6 Asset turnover

+13 2 705 3 045 Assets

(4)9.7%9.3%Operating margin

+15 404463Operating Profit

+20 4 155 4 974 Revenue

% ChangeJune 2004June 2005Rm

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Holcim (46%)

+19 1.8 2.1 Asset turnover

+9 1 733 1 881 Assets

+17 23.6%27.7%Operating margin

+52 7231 099Operating Profit

+30 3 062 3 967 Revenue

% ChangeJune 2004June 2005Rm

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Net interest paid

• Issue of R1bn convertible bond in March 2005 enabled short term debt to be repaid– More attractive interest rate terms

13,2%9,1%Average fixed rate

June 2004June 2005Rm

12,8%10,9%Average prime rate

281240Interest paid

6673Interest income

214167Net interest paid

Page 14: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Cost of share options

• Practice adopted several years ago

– Costs of all share options expensed regardless of whether they have

vested or not

• Costs calculated as difference between closing price on 30 June

and option price (strike)

• Costs attributable to subsidiaries included in operating expense

– R31 million in 2005

• Costs attributable to Holcim (South Africa) expensed to income

from associates & joint ventures

– R12 million in 2005

Page 15: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Earnings per share

+10548,599,3Earnings

+6955,3 93,5Headline earnings

% ChangeJune 2004June 2005Cents

+17630737NAV

•No change in weighted average number of shares

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Balance sheet – Equity movements

-33Revaluation reserve

-25Negative goodwill transfer

2 495

189

(20)

(358)

(15)

(124)

2 823

June 2004*

387Earnings for period

2 921Closing shareholders’ funds

-IAS 17 and leases

June 2005Rm

42Foreign currency translation

(6)Equity accounted reserve movements

(55)Dividend paid

2 495Opening shareholders’ funds

* June 2004 figures restated

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Currency movements

Australian Dollar

US Dollar

(4)4,864,67Average

+184,335,09Closing

(9)6,866,23Average

+76,286,68Closing

% Change 2004June 2004June 2005

Movements versus the Rand

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Borrowings

19%70%Long term

22%15%Short term

85%

15%

1 166

857

2 023

June 2005

41%Fixed

June 2004Rm

59%Floating

1 351Net debt

746Cash

2 097Interest bearing debt

Page 19: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Working capital

42

89

122

37

90

118

0

20

40

60

80

100

120

140

Stock days Debtor days Creditor days

Jun-05 Jun-04

Days

Net working capital:

2004 9 days

2005 9 days

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Capital expenditure

(201)(252)Net (decrease)/increase

(221)(336)Disposals

(393)(384)Depreciation

413468Total additions

168206Expansion

245262Replacement

June 2004June 2005Rm

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Reconciliation of cash balances

48Reclassification of leases

8Other

(1 166)Closing net borrowings

162Assoc. costs & other investments

(55)Dividends

(313)Capital expenditure

(76)Tax

(89)Working capital movement

(167)Net finance costs

667Cash generated by operations

(1 351)Opening net borrowings

June 2005Rm

Page 22: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Operational ReviewCarl Grim

Page 23: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Organisational structure

CEO: Carl Grim

FD: Dennis Gammie

100% 75% 75% 75% 75% 75%

McConnell Dowell Corporation

Construction Opencast Mining Process Engineering Manufacturing Trident Steel

Dave Robinson Howard Jones Brian Wilmot Nick Bell Doug Keet Ben Fourie

Civil & Marine Building & Property Development

South African Operations Metallurgical Operations Steeledale Merchanting

Mechanical & PipelinesMechanical & Electrical

West African Operations Engineering Services Infraset Automotive

Electrical MaintenanceCivils, Roads & Earthworks &

East African Operations Project Management Duraset Cutting

Underground ContractingMarikana Mine MegChem (50%) Lennings Rail Coastal Branches

Trident Sterling Tube

Trident Specialty Steels

Engineering, Construction & Mining Contracting Cluster Steel & Allied Cluster

46%

Holcim (South Africa)

Karl Meissner-Roloff

Dudfield Factory

Ulco Factory

Blending Depots

Stone & Sand Quarries

Ready Mixed Concrete

Slagment

Tanga Cement (62,5%)

Cement

Page 24: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Aveng clusters

Revenue 2005

Engineering, Construction &

Opencast Mining (R9bn)50%

Steel & Allied (R5bn)27%

Cement (equity accounted)

(R4bn)23%

Page 25: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Business segmentation

Trident Steel(23%)

Grinaker-LTA Construction

(37%)Engineering &

Project Management

(3%)

Grinaker-LTA Opencast Mining

(11%)

Grinaker-LTA Manufacturing

(12%)

McConnell Dowell Corporation

(14%)

33%

23%

16%

14%12%

2%

2005 - R13 535 million 2004 - R11 740 million

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McConnell Dowell Corporation

Grinaker-LTA Construction

R6,8 billion

Construction

• Significant recovery potential

• Focus on mining, energy and

heavy infrastructure

• Grinaker-LTA Construction

– Gautrain downstream opportunities

– Soccer World Cup, Eskom and

Transnet

– Mining investment

– Non-residential building

• McConnell Dowell Corporation

– China driven

– Oil price driven

Page 27: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Construction segmentation

Mechanical & Electrical

(26%)

Civil & Marine(54%)

Electrical Maintenance

(23%)

Mechanical & Pipelines(23%)

Grinaker-LTA Construction(R5 billion)

McConnell Dowell Corporation(R1,8 billion)

Building & PropertyDevelopment

(36%)

Civils, Roads & Earthworks & Underground Contracting

(38%)

Page 28: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

ConstructionImpact of Rand volatility

Apr-02 Oct-02 Apr-03 Oct-03 Apr-04 Oct-04 Apr-05 Oct-05 Apr-06

5

6

7

8

9

10

11

12

13

Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04

Tender exchange rateContract average currency rate

ZAR/US$

Assumptions:1. 3-month award

24-month contract2. Projected exchange rates

at current levels

Page 29: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

ConstructionImpact of Rand volatility on profitability

Exchange rate loss/gain

Apr-02 Aug-02 Dec-02 Apr-03 Aug-03 Dec-03 Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 Dec-05 Apr-06

Forex Gain

Forex Loss

Page 30: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Impact of Rand volatilityCase A: $100m Project - July 2001

-20

0

20

40

60

80

100

120

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Tendered profit

Actual profit

Exchange rate benefits

Months

Pro

fit

& L

oss

(R

an

ds)

R41,5m

Assumptions:•30% of costs in rands•Paid in US$•10% margin•3-month award period•24-month construction period

Page 31: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Impact of Rand volatilityCase B: $100m Project – Oct. 2002

-20

0

20

40

60

80

100

120

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Tendered profit

Actual profit

Exchange rate loss

Months

Pro

fit

& L

oss

(R

an

ds)

(R106,3m)

Assumptions:•30% of costs in rands•Paid in US$•10% margin•3-month award period•24-month construction period

Page 32: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Moving out of Africa

South Africa(75%)

Africa/Middle East

(14%)

Australia & SE Asia

(11%)

34%

10%

56%

Assets 2005 - R7 259 million Assets 2004 - R6 468 million

Page 33: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Construction order book

Grinaker-LTA – South Africa Grinaker-LTA - Africa

79

96

38

5

1912

Building &Property

Development

Civils, Roads &Earthworks &UndergroundContracting

Mechanical &Electrical

2006 2007

49 48

63

410

19

Building &Property

Development

Civils, Roads &Earthworks &UndergroundContracting

Mechanical &Electrical

Order book % of 2005 revenue

Order book % of2005 revenue

Page 34: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Construction order book

81

73

64

75

70

Civil & marine Mechanical & pipelines Electrical Maintenance

20062007

Order book % of 2005 revenue

Page 35: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Grinaker-LTA ConstructionSelected contracts

US$27,5m

Tete Project (Warehouse)Mozambique Leaf Tobacco

US$12mJackets, Bridges & Piles for the EAP 1A ProjectTechnip / ExxonMobil

R481mBerg River Project (Dam)TCTA

R417mMR5 and MR6 – Swaziland (Roads)Ministry of Public Works and Transport - Swaziland

R71mMondi Secondary Effluent Treatment PlantMondi Limited

R104mWalter Sisulu Square of DedicationJohannesburg Development Agency

R53mLow Cost Housing in HeidelbergProvincial Department of Housing

R57mEmperor’s Palace upgrade (Hotel)Peermont Global

Page 36: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

McConnell Dowell CorporateSelected contracts

USD$26mBengalon Coal Port & Processing Facility, Kalimantan, Indonesia

PT MitratamaPerkasa & KaltimPrima Coal

SGD$19mPhase 6 Jetties Nos. 18 & 19, JurongIsland, Singapore

Oil Tanking

USD$270m (in JV)

Oil & Gas Pipeline Contracts, AzerbaijanBTC & SCP

NZD$15mMercer to Long Swamp section of the Waikato Expressway,New Zealand

Transit NZ

AUD$60mKogan Creek Civil & Chimney Erection Contracts, Queensland

Siemens

AUD$103mPort Hedland to Telfer Gas Pipeline, Western Australia

GasNet

Page 37: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Grinaker-LTA Opencast Mining

• Number 1 in Africa

• R900 million in assets

• Exchange rate sensitive

• Mali, Guinea, Tanzania, Botswana,

Namibia and South Africa

• Marikana challengeGrinaker-LTA

Opencast Mining

R1,5 billion

Page 38: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Marikana dispute

• 18 Feb 2002 contract awarded for 5 years R12.15 to US$

• Disagreement on “Rise & Fall” price adjustment mechanism

(R130m at June 2005)

• Mediation in March and April 2004 failed

• Arbitration set for 28/29 April 2005

• Agreement on 14 April to appoint auditors to quantify value of

dispute - Report awaited

Page 39: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Order book – Opencast Mining

89

78

2006 2007

135125

2006 2007

Order book % of 2005 revenue

Order book % of 2005 revenue

South Africa Africa

Page 40: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Grinaker-LTA Opencast MiningSelected contracts

R750mSadiola Hill Gold MineAngloGold Ashanti

R1bnGolden Pride Opencast GoldResolute Samantha

R1bnKlipbank Opencast Coal MineIngwe Colliery

R2,03bnWonderwater Opencast Coal MineSasol

Page 41: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Grinaker-LTA Process Engineering

• Upstream of construction on

project value chain

• Attractive risk-adjusted

opportunity

• Focus on mining and energy

clients

• Growth opportunity for Aveng

Grinaker-LTA Engineering &

Project Management

R340 million

Page 42: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Order book – Process Engineering

77

2

2006 2007

5359

2006 2007

South Africa Africa

Order book % of 2005 revenue

Order book % of 2005 revenue

Page 43: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Grinaker-LTA Process EngineeringSelected contracts

R11mSumo Coal Preparation PlantSumo Collieries

R48mSWS ProjectNatref

US$180mMufulira Smelter Expansion Project Phase 1

Mopani Copper Mines (MCM)

R150mAcp Acid Plant RectificationAnglo Platinum

EPCM : R37mCapex: US$43m

Lagos Refined Product Facility Project Energem Nigeria Ltd

R64,7mClear Ash Water Evaporator Replacement Sasol

Page 44: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Aveng Construction order book

75

68

102

66

22

11

92

33

McConnellDowell

Grinaker-LTAConstruction

OpencastMining

ProcessEngineering

2006

2007

Order book % of 2005 revenue

By activity By region

75

68

22

78

37

24

Australia & SE Asia Africa South Africa

Order book % of 2005 revenue

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Construction order book (two years)

6.6

8.2

8.7

9.8

8.2

8.9

7.5

8.7

7.2

8.7

0

2

4

6

8

10

12

Dec 2000 June 2001 Dec 2001 June 2002 Dec 2002 June 2003 Dec 2003 June 2004 Dec 2004 June 2005

R billions

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Construction order book - (two years)% of revenue

129%

109%

94%

102%

82%

91%

115%

82%

102%

95%

0%

20%

40%

60%

80%

100%

120%

140%

Dec 2000 June 2001 Dec 2001 June 2002 Dec 2002 June 2003 Dec 2003 June 2004 Dec 2004 June 2005

Targetzone

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Steel & Allied

• Solid and consistent financial

performance

• Leading positions and large

market shares

• Revenue contribution to Aveng

increased to 37% from 26% over

two years Trident Steel

(23%) Grinaker-LTA Manufacturing

(12%)

R5 billion

Page 48: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Steel & Allied

Trident Steel

• Steel coil: Shaped blanks for automotive industry

• Steel sheet: Cut, bent & drilled for manufacturing industry

• Steel sections: Cut for construction industry

• Steel tube manufacturing capacity updated

• Speciality steel for specialised manufacturing

Grinaker-LTA Manufacturing

• Steeledale: Rebar and mesh• Infraset: Precast concrete

products for infrastructure e.g. railway sleepers, concrete pipes, culverts and poles, pavers and landscaping products

• Duraset: Steel & concrete products for mining e.g. roof bolts, concrete/timber stope support systems

• Lennings Rail: Rail maintenance services

Page 49: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Steel & Allied market segmentsRevenue 2005

Manufacturing(35%)

Automotive(34%)

Construction(22%)

Exports(9%)

Mining(13%)

Construction(85%)

Trident Steel(R3,2 billion)

Grinaker-LTA Manufacturing(R1,8 billion)

Exports(2%)

Page 50: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

South African steel market

Prices

--6,5%(5,0%)February 2005

12%19%--January 2005

--7,5%-November 2004

--7,5%6,8%October 2004

--(4,0%)-August 2004

(4,7%)(4,7%)--July 2004

Electro galvanised coil

Cold rolled coilFlat plateStructural steelMonth

Tonnage (% change)

9.9%

4.7%

-8.2%-9.4% -10.5%

7.5% 7.3%

4.0%

-8.0%

11.4%

-9.7%

-5.8%

6.4%4.0%

15.8%

-15.4%

19.8%

-8.2%

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Page 51: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Holcim (South Africa)

R4 billion

Cement – Holcim (South Africa)

• Outstanding financial performance

• Number 2 in South Africa with

30% to 34% market share

• 4,1mt of cement capacity

• Nature and timing of additional

capacity being reviewed

• Sand, stone, ready mixed

concrete, slagment, silica fume

and 62% of Tanga Cement

• DK2 R165m upgrade to meet

world class emissions standards

• Aveng owns 46%

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Industry cumulative average monthly sales

22 000

27 000

32 000

37 000

42 000

47 000

52 000

Jan

Feb

Mar

Ap

r

May

Jun

Jul

Au

g

Sep

Oct

No

v

Dec

2001 2002 2003 2004 2005

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Looking forward

Page 54: Building sustainable value - | Aveng · 2016-12-06 · • All suspensive conditions met in BEE transaction with ... •Costs calculated as difference between closing price on 30

Looking forward - Cement demand

CEMENT MARKET

• Residential 57%

• Non-residential 30%

• Construction 13%

Residential

18.1%

6.3% 6.6%

12.8%

22.5%

10.9%

4.5%3.0%

2000 2001 2002 2003 2004 2005 2006 2007

Non-residential

4.6% 4.9%

-8.4%

1.0%

9.5%7.7%

9.8%

5.6%

2000 2001 2002 2003 2004 2005 2006 2007

Construction

-5.5%-6.9%

11.2%

18.6%

8.2% 7.5%

12.0% 12.0%

2000 2001 2002 2003 2004 2005 2006 2007

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Looking forward - Mass housing

•Total investment required estimated to be

R40bn

•Target market is R1 500 to R7 500 monthly

income bracket

Low income housing

(Financial Sector

Charter)

•Reduce backlog of 1,4m units by 50% by

2014

•Gauteng budget R50bn for the next five years

•Target market is the unemployed

Affordable housing

(Government focus)

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Mass housing – Cement consumptionC

em

en

t u

sag

e

0

100

200

300

400

500

600

700

800

900

1000

2001 2002 2003 2004 2005 2006 2007 2008

Affordable housing (Government)

Low income housing (FinancialServices Charter)

000 tons

SARB Forecast

AvengForecast

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Looking forward - Cement sales

-9.3%

1.9%

7.1%

-2.6%

-10.0%

9.9%

4.5%

6.6%

17.3%

13.9%

8.8%7.0%

5.0%

2.0%

-2.4%

-2.7%

Jun99

Dec99

Jun00

Dec00

Jun01

Dec01

Jun02

Dec02

Jun03

Dec03

Jun04

Dec04

Jun05

Dec05

Jun06

Dec06

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Looking forward - Eskom

• R93bn investment by 2010

– R62bn Power stations

– R15bn Transmission

– R9bn IPP Projects

• First projects have already been approved and others still in

feasibility study phase

• Aveng involved in building most of South Africa’s power stations

– Currently involved in building two power stations in Australia

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Looking forward - Transnet

• Custodian of port, rail and pipeline infrastructure

• Phase 1 of infrastructure investment plan of R37bn to be split

– R15bn Spoornet

– R14,2bn National Ports Authority

– R4,5bn SA Port Operations

– R3,4bn Pipeline

• Aveng’s has international ports experience and extensive rail

capabilities

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Looking forward - Soccer World Cup

Award of 2010 World Cup

Establishment of L.O.C

Government enabling legislation

Audit of provinces & stadia

Design, build and upgrade stadia

SAFA infrastructure completion

FIFA final inspection

Gautrain award

Gautrain

Airports

Roads & stadium precincts

Hotels & private developments

CAF VP Soccer Tournament

Soccer World Cup

2008 2009

2010

2004 2005

2006 2007

Initial deliveryAdjusted delayed deliveryUnchanged delivery

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Looking forward – Government infrastructure expenditure

Government infrastructure spending - 2005 to 2008R167 billion

Infrastructure maintenance

19%

Low cost housing13%

Provincial infrastructure

7%Residential services13%

Building24%

Civil/Roads/Transport24%

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Looking forward - Civil engineering activity

1.5

2

2.5

3

3.5

4

4.5

2000 2001 2002 2003 2004 2005

Billion

s

Turnover Awards

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Looking forward – Automotive industry

Vehicles - Domestic Production and Export

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Export Domestic Production

Number of Vehicles

Source: NAMSA

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Looking forward – Fixed investment

Gross Fixed Capital Formation as a Percentage of GDP

0%

5%

10%

15%

20%

25%

30%

35%

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

Assuming Government meets its objectives:

•GDP growth of 4%

•GFCF/GDP of 25% by 2014

Then construction industry will approximately double in size over 10 years

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Conclusion

• Aquarius Platinum and Aveng need to find a way forward on

Marikana Mine

• Construction has turned and has considerable upside potential

• Steel & Allied and Cement will continue to deliver earnings

growth

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Conclusion

• Gearing acceptable and financial structures sound

• Trailblazing BEE initiatives in line with Construction Charter

• Macro variable favourable – stable rand, high oil & commodity

prices, active China and positive fixed investment climate in

South Africa

• Resources available to benefit from increased level of work

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Prospects

Aveng will deliver on its three corporate objectives in 2006

– A growth in headline earnings per share of CPIX + 10%

– A return on average equity of CPIX + 10%

– A net debt to equity ratio of 35%

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Building Sustainable Value

www.aveng.co.za

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Sustainability

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Health and safety

• Safety is of paramount importance

– 9 000 employees attended safety courses

– Numerous safety awards including NOSCAR, NOSA and BIFSA

– DIFR 0,69 (2004: 0,62) – considerably better than the industry

average of 8,6

– Achieved five million injury free hours on a single site

• HIV/Aids is our biggest health challenge

– Clear HIV/Aids policy focused on preventative measures

– Wellness programme developed with Lifeline

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Environment

• Committed to conducting business in accordance with the

principles of sustainable development

– Protection of the environment

– Welfare of the broader community

• Specific actions include

– ISO 14001 in contracting companies

– Compliance with all relevant environmental legislation

– Compliance with environmental management commitments of clients

– Ensuring compliance by subcontractors and suppliers

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Black Economic Empowerment

• 25% of South African managed assets sold to black consortium

– TisoGroup (36%)

– Woman’s Trust (12%)

– Community Empowerment Trust (20%)

– Trust benefiting employees (24%) and black business partners

(8%)

• Suspensive conditions met in February 2005

• Aveng’s BEE transaction in line with Draft Construction Charter

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Construction Charter

• Industry, Union and Government stakeholders involved

• Charter will incorporate

– Charter Document (95% complete)

– Scorecard (7-year targets)

• Way forward

– Department of Public Works to ratify Charter document

– DTI to issue Charter as a Code of Good Practice

• Aveng is well aligned with transformation focus of the Charter

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Corporate Social Investment

• 1% of prior year’s headline earnings committed to deserving

community investment projects

• CIDA city campus

• Infrastructure development of greater Roodekop for benefit of

local community

• Other examples:

– Borokanelo Trust projects in Kimberley region

– Kutlwanong Home craft development trust

– Development of schools in Dudfield area