JSE- and AIM-listed, South African-based silica and anthracite producer Petmin Limited today announced a 27% increase in headline earnings per share (HEPS) to 2.97 cents for the half-year ended 31 December 2006, compared with same period in 2005.
The increase was achieved in spite of an approximate doubling of the company’s weighted average number of issued shares to 441 205 000, primarily to fund the Somkhele Anthracite Project in KwaZulu-Natal, which is scheduled to begin generating revenue during the second quarter of 2007.
Basic earnings per share (BEPS) were down 51% to 8.73 cents, due mainly to profit of R33.8 million generated on the acquisition of subsidiary Springlake Holdings (Pty) Limited in the half-year ended 31 December 2005 and recognised in the BEPS calculation. Without this once-off profit, BEPS for the half-year ended 31 December 2005 would have been 2.34 cents.
Group revenue rose by 177% to R159.5 million, reflecting the inclusion of Springlake’s results for the half-year under review. Group revenue of R57.7 million in the half-year to 31 December 2005 reflected the inclusion of only one month of Springlake’s results.
After accounting for Group cost of sales of R135.7 million, Group gross profit increased by 112% to R23.7 million. This largely reflects exceptional profit from Mpumalangabased silica producer SamQuarz (Pty) Limited (SamQuarz) on the back of improved production and sales volumes, the latter boosted by the sale of chert stocks previously ascribed a zero value.
Capital expenditure totalled R68 million, R53 million of which was directed to the development of the Somkhele Anthracite Project.
Production at SamQuarz increased by approximately 46%, reflecting improved demand. This, together with disciplined cost control, boosted profitability.
Springlake’s performance was disappointing. A 40% increase in the monthly average run-of-mine (ROM) production resulted mainly from improved performance from the opencast sections. Management focus for the next six months will be on reducing the unit cost of production by increasing production volumes and improving efficiencies in the underground sections.
In October 2006, Springlake Colliery was granted a new order mining right on portions of the farm Besterdale. The granting of this mining right paves the way for the operation to increase opencast capacity from approximately 40 000 to 70 000 ROM tonnes a month.
The Somkhele Anthracite Project is nearing completion. The Group has drawn down R36 million of the R40 million banking facility negotiated with Standard Bank.
Petmin concluded its secondary listing on the London Stock Exchange’s Alternative Investment Market (“AIM”) on 20 December, 2006. Some 40 million new shares were issued at 9p per share, raising approximately R49 million. Tradability as a percentage of free float was an exceptional 62%.
The company says the listing presents it with a platform for future growth by:
Petmin announced in December 2006 that it had entered into an agreement with GVM Metals Limited to sell its entire shareholding in Baobab Mining and Exploration (Pty) Ltd for GBP 2.5 million, and at 31 December 2006 all of the suspensive conditions – save for the ministerial consent required by Section 11 of the Mineral and Petroleum Resources Development Act – had been obtained.
As noted in the 30 June 2006 Annual Report, the Directors have given further consideration to the financial performance of Springlake Colliery. It is their opinion that the warranted profit will not be met and have reached agreement on this with Springlake Vendors, representing 91% of the shares to be issued under the profit warranty. The contingent consideration has been re-estimated to R1.5 million, resulting in an amount of R26.052 million being recognised as “profit on acquisition of subsidiary” in the income statement during the period under review.
The production from the newly developed areas of the SamQuarz open pit, while generating the same overall product yield, has resulted in a different sizing distribution of products. This may necessitate additional capital expenditure at SamQuarz in order to meet the increased demand from key customers. Management does not foresee any material effect on the profitability of SamQuarz.
With increased opencast production planned in the second quarter of 2007 and the measures introduced to the underground operations, management expects a significantly improved performance in the six months to 30 June 2007. The coal market remains buoyant and Springlake is expected to enjoy these prices for the remainder of the calendar year.
With first sales from the project expected in the second quarter of 2007, management expects a positive, although small, contribution from Somkhele in the six months to 30 June 2007.
Acquisitive growth remains a focus of Petmin and management is continuously reviewing potential new business opportunities.
© 2009 Petmin Limited