OM HOLDINGS LIMITED
(ARBN 081 028 337)
No. of Pages Lodged: 7 Covering letter
29 ASX Appendix 4D - Preliminary Final Report
29 August 2016
ASX Market Announcements ASX Limited
4th Floor
20 Bridge Street
SYDNEY NSW 2000
Dear Sir/Madam
The Board of OM Holdings Limited ("OMH" or the "Company", and together with its subsidiaries, the "Group") reports a 24% increase in revenue for the 6 months period ended 30 June 2016 from A$148.3 million to A$183.4 million.
HIGHLIGHTS
-
H1 2016 revenue of A$183.4 million, representing a 24% increase on H1 2015, mainly from higher tonnages of alloys traded, and a moderate rebound in prices of manganese ores
-
Gross profit margin improved from -0.5% in H1 2015 to 16.2% in H1 2016, in line with stronger ore prices, mainly from the sale of OMM manganese ore, and run-down of existing OMM ore and manganese alloys from our China subsidiaries
-
Exchange losses for the period in H1 2016 of A$83.2 million was the main contributor to the Group's losses of A$82.2 million. This resulted predominantly from the foreign exchange hedging contracts entered into under the OM Sarawak project finance facility (as required by the financing banks)
-
A total of 720,607 tonnes of ores (H1 2015: 838,313 tonnes) and 57,860 tonnes of alloys (H1 2015: 18,695 tonnes) were sold during H1 2016
-
Inventories decrease to A$247.1 million (31 December 2015: A$259.8 million) from the sale and run-down of inventories in our China subsidiaries
-
Total borrowings decrease by 5% from A$570.1 million as at 31 December 2015 to A$541.7 million as at 30 June 2016 from the partial repayment of the Group's borrowings during the period
-
Cash reserves of A$17.1 million as at 30 June 2016
#08 - 08, Parkway Parade 1
80 Marine Parade Road, 449269 Singapore
Tel: 65-6346 5515 Fax: 65-6342 2242
Email address: [email protected] Website: www.omholdingsltd.com ASX Code: OMH
OM HOLDINGS LIMITED - GROUP KEY FINANCIAL RESULTS
|
KEY DRIVERS
(Tonnes)
|
Period Ended 30
Jun 2016
|
Period Ended 30
Jun 2015
|
Variance
%
|
|
Sales volumes of Ores
|
720,607
|
838,313
|
(14)
|
|
Sales volumes of Alloys
|
57,860
|
18,695
|
>100
|
|
FINANCIAL RESULTS
|
|
Total sales
|
183.4
|
148.3
|
24
|
|
Gross profit
|
29.7
|
(0.7)
|
>NM
|
|
Gross profit margin (%)
|
16.2%
|
(0.5%)
|
|
|
|
Other income
|
17.3
|
0.6
|
>100
|
|
Distribution costs
|
(8.4)
|
(6.6)
|
27
|
|
Administrative expenses
|
(7.2)
|
(9.4)
|
(23)
|
|
Other operating expenses
|
(7.7)
|
(16.5)
|
(53)
|
|
Exchange (loss) / gain
|
(83.2)
|
7.5
|
NM
|
|
Impairment charge
|
(0.6)
|
(0.8)
|
(25)
|
|
Finance costs
|
(18.2)
|
(8.5)
|
>100
|
|
Share of results of associates
|
1.9
|
4.4
|
(57)
|
|
Loss before income tax
|
(76.3)
|
(30.0)
|
>100
|
|
|
|
Income tax
|
(5.9)
|
0.4
|
NM
|
|
Loss for the period
|
(82.2)
|
(29.6)
|
>100
|
|
|
|
Non-controlling interests
|
24.0
|
(1.7)
|
NM
|
|
Loss after tax attributable to owners of the Company
|
(58.2)
|
(31.3)
|
86
|
|
OPERATING RESULTS ADJUSTED FOR NON-CASH ITEMS
|
|
Net loss after tax
|
(82.2)
|
(29.6)
|
|
Adjust for non-cash items:
|
|
Inventory write-down/(write-back)/, net
|
(5.2)
|
3.2
|
|
Impairment charge
|
0.6
|
1.3
|
|
Fair value gain
|
(3.4)
|
(0.5)
|
|
Depreciation/amortisation(2)
|
7.8
|
14.2
|
|
Unrealised exchange loss
|
62.1
|
1.5
|
|
Finance costs (net of income)
|
18.1
|
8.3
|
|
Income tax expenses
|
5.9
|
(0.4)
|
|
Adjusted EBITDA(1)
|
3.7
|
(2.0)
|
-
Adjusted EBITDA is defined as operating profit before depreciation and amortisation, impairment write-back/expense, non- cash inventory write-downs, deferring stripping, and other non-cash items. Adjusted EBITDA is not a uniformly defined measure and other companies in the mining industry may calculate this measure differently. Consequently, the Group's presentation of Adjusted EBITDA may not be readily comparable to other companies' figures.
-
Inclusive of depreciation and amortisation charges recorded through cost of sales.
FINANCIAL ANALYSIS
The Group achieved revenue of A$183.4 million in H1 2016, representing a 24% increase from the A$148.3 million recorded for H1 2015 despite a 9% decrease in total sales volume traded of 778,467 tonnes. This increase in revenue was mainly from the Smelting and Marketing and Trading segments as a result of higher ferrosilicon volumes produced and traded from the Group's 75% owned smelter in Sarawak, which contributed 53,480 tonnes of sales made with revenue of A$66.4 million for H1 2016. This increase was offset by lower manganese ore volumes traded from the Group's wholly-owned Bootu Creek Manganese Mine (which was put into voluntary administration at the end of 2015) and other third party ores (including ores from the Tshipi Borwa Mine), which decreased 21% in the current period (657,801 tonnes) as compared to the same corresponding period in 2015 (827,495 tonnes).
Prices of manganese ores and ferro-manganese alloys recorded a moderate rebound in the beginning of the second quarter of 2016 and this had a positive impact on sales revenue and gross profit margins. The Group's overall margin improved from a negative 0.5% in H1 2015 to a positive of 16.2% in H1 2016 mainly attributed to the higher prices of manganese ore realised from the sale of OMM manganese ore. In addition, with the improvement in ore prices, the run-down of the existing OMM manganese ore and manganese alloys from our China subsidiaries during the period also contributed positively to the improvement in the Group's margins.
Distribution costs increased in H1 2016 as compared to H1 2015 mainly due to the increased tonnages of ferrosilicon shipped and sold in H1 2016 against H1 2015. Finance costs increased from A$8.5 million in H1 2015 to A$18.2 million in H1 2016 mainly from the OM Sarawak project financing loan.
Administrative and other operating expenses for the current period decreased to A$7.2 million and A$7.7 million respectively, from A$9.4 million and A$16.5 million in H1 2015 mainly due to lower legal and professional fees incurred of A$1.3 million in the current period (H1 2015: A$4.2 million), and a reduction in depreciation and amortization expenses in H1 2016.
The exchange loss of A$83.2 million for H1 2016 was predominantly contributed from OM Sarawak's exchange losses of A$77.2 million. This was mainly from the transfer of exchange losses from hedge contracts (which was a requirement under the OM Sarawak project finance facility) previously recognised in Hedging Reserve amounting to A$48.8 million was charged to the profit or loss as these hedge contracts were no longer hedge effective as at 30 June 2016. Primarily, as there was a change in the underlying asset of the hedge contracts with the reduction in the nominated power capacity in OM Sarawak, the hedge contracts were deemed ineffective. In addition, with the strengthening of the Malaysian Ringgit ("MYR") against the USD during the current period, there was a further unrealised exchange loss recognised of A$28.5 million mainly from the translation of MYR denominated payables.
There was an income tax expense of A$5.9 million in H1 2016 mainly from the write-off of deferred tax assets from a China subsidiary which amounted to A$4.6 million.
The exchange losses for H1 2016 of A$83.2 million was the main contributor to the Group's losses for the period of A$82.2 million. The Group's loss per share increased to A$0.080 in H1 2016 from A$0.043 in H1 2015.
Results Contributions
The contributions from the OMH Group business segments were as follows:
|
A$ million
|
Period ended 30 Jun 2016
|
Period ended 30 Jun 2015
|
|
Revenue*
|
Contribution
|
Revenue*
|
Contribution
|
|
Mining
|
-
|
-
|
38.9
|
(20.2)
|
|
Smelting
|
78.9
|
(74.3)
|
23.8
|
5.4
|
|
Marketing, logistics and trading
|
152.6
|
19.5
|
150.6
|
(6.7)
|
|
Other
|
0.4
|
(5.3)
|
0.2
|
(4.5)
|
|
Net loss before finance costs
|
(60.1)
|
(26.0)
|
|
Finance costs (net of income)
|
(18.1)
|
(8.3)
|
|
Share of results of associates
|
1.9
|
4.4
|
|
Loss before tax **
|
(76.3)
|
(30.0)
|
* revenue contribution from segments is subsequently adjusted for intercompany sales on consolidation
** numbers may not add due to rounding
Mining
On 15 December 2015, the mining operations at the Bootu Creek Manganese Mine were suspended due to the ongoing and material fall in the manganese price. As announced to ASX on 4 January 2016, OMM was placed into voluntary administration on that date.
As a result of this, there was no mining and production activity carried out at the Bootu Creek Manganese Mine for H1 2016.
Smelting
This business segment currently covers the operations of the Qinzhou manganese alloy smelter operated by OM Materials (Qinzhou) Co Ltd ("OMQ"), as well as OM Materials (Sarawak) Sdn Bhd ("OM Sarawak"), where construction was completed at the end of 2015.
The operations in OMQ (which has ceased operations temporarily since October 2015) and OM Sarawak recorded revenue of A$78.9 million for H1 2016 against A$23.8 million for H1 2015. The increase in revenue was mainly due to higher tonnages of ferrosilicon produced in H1 2016 of 61,858 tonnes (H1 2015: 31,361 tonnes) with a revenue contribution of A$66.4 million for the period ended 30 June 2016. There was no production activity in OMQ during the current period, but the company recorded revenue contribution of A$11.7 million from the sale of its existing inventories for H1 2016.
The loss of A$74.3 million in this segment was mainly from exchange losses in OM Sarawak from hedging contracts previously recognised in hedging reserve which was transferred to the Statement of Comprehensive Income as these hedge contracts were no longer hedge effective as at 30 June 2016, and unrealised exchange losses from the translation of MYR denominated payables.
Marketing, logistics and trading
Revenue from the Group's trading operations increased marginally by 1% from A$150.6 million (H1 2015) to A$152.6 million (H1 2016), primarily due to higher ferrosilicon volumes traded in H1 2016. However this increase was marginally offset by lower volumes of manganese ores sold during the period. In addition, with the moderate rebound in prices of manganese ores and ferro-managanese