Minmetals Resources Ltd (HK: 1208) (MMR) today released its financial results for the year ended 31 December 2010.
The results include the full-year performance of Minerals and Metals Group (MMG), which the Company acquired at the end of the year.
MMR also announced that its Chairman, Mr. Li Fuli, will retire from the Board with effect from 1 April 2011 and will be replaced as Chairman by Mr. Wang Lixin.
Mr. Gao Xiaoyu will join the Board as a Non-Executive Director upon Mr. Li’s retirement. (Additional details about this matter are provided below.)
Key Points
> Net Profit after Tax of US$430.4 million; includes acquisition of MMG in 2010.
> Fully-diluted earnings per share up strongly to US$0.09.
> Strong free cash flow generation.
> Strategic objective of becoming a substantial international, diversified, upstream base metals company well on track.
> Trading and Fabrication assets and investments reclassified as non-core and will be divested during 2011.
> Capital likely to be raised under the Specific Mandate (subject to market conditions), but strong profit and cash generation make it likely that less than the previously indicated US$1.6 billion will be raised.
Chief Executive Officer Andrew Michelmore commented on the positive results.
“MMR has generated Net Profit after Tax of US$430.4 million, which is a very strong result, reflecting good production levels, effective cost management and the current healthy commodity price environment. While it is not appropriate to make too many absolute comparisons to prior years because of the inclusion of MMG in these results, it is of note that fully-diluted earnings per share for MMR in 2010 increased by 46.3% to US$0.09.”
Mr Michelmore continued “We have clearly stated our strategic objective of becoming a substantial international, diversified, upstream base metals company, and the acquisition of MMG by MMR was the first important step in the pursuit of this objective.”
“Further, MMR announced that it intends to divest its Trading and Fabrication assets and investments at fair market value, over the course of 2011. This will enable MMR to focus on growing as an upstream base metals company.”
Mr Michelmore added, “The Company has previously indicated it may seek to raise up to US$1.6 billion in new capital by 31 July 2011 under the Specific Mandate authorised by shareholders to repay debt incurred to finance the acquisition of MMG and for other growth purposes.”
“The Company intends to exercise the mandate granted by shareholders, but the strong cash and profit generation we have reported today, along with the expected proceeds to be received from the sale of non-core assets, means that it is unlikely we will look to raise the full amount. A final decision on the timing and size of any capital raising will depend on market conditions.”
The following table summarises MMR’s results for 2010:
| (US$ million) | 2010 | Continuing businesses | Non-continuing businesses | Unallocated (VSA costs) |
| Revenue | 3,582.1 | 1,919.9 | 1,662.2 | – |
| EBITDA (1) | 878.5 | 904.3 | 60.6 | (86.4) |
| EBIT (2) | 560.0 | 604.8 | 41.6 | (86.4) |
| Net interest expense | (40.9) | (38.6) | (2.3) | – |
| Equity-accounted profits | 41.0 | – | 41.0 | – |
| Profit before tax | 560.1 | 566.2 | 80.3 | (86.4) |
| Income tax expense | (129.7) | (125.7) | (4.0) | – |
| Net profit after tax | 430.4 | 440.5 | 76.3 | (86.4) |
| Minority interests | (21.0) | (21.0) | – | – |
| Net profit after tax attributable to members of the Company | 409.4 | 419.5 | 76.3 | (86.4) |
| Earnings per share (US cents): | ||||
| > Nominal | 13.8 | |||
| > Fully-diluted | 9.0 |
(1) Earnings Before Interest, Tax, Depreciation and Amortisation
(2) Earnings before Interest and Tax
The acquisition of MMG has substantially increased the Company’s profitability, as is highlighted in the following table of segmental performance. NB: the following excluded all costs associated with the VSA.
| (US$ million) | Revenue | EBITDA |
| MMR pre-acquisition | 1,662.2 | 60.6 |
| Century | 711.4 | 356.2 |
| Sepon | 596.7 | 358.6 |
| Golden Grove | 391.3 | 192.4 |
| Rosebery | 220.5 | 104.5 |
| Other Operations | – | (107.4) |
| MMG assets | 1,919.9 | 904.3 |
“A key feature of today’s results is the strength of the cash flow generated by MMR. After funding capital expenditure of US$323.2 million and exploration expenditure of US$50.9 million, the Company’s performance in 2010 yielded free cash flow of US$469.4 million,” said Mr Michelmore.
This is outlined in the following table:
| (US$ million) | 2010 |
| EBITDA from operations: | |
| Continuing operations | 853.4 |
| Non-continuing | 60.6 |
| 914.0 | |
| Exploration expenditure | (50.9) |
| Other items | 15.4 |
| 878.5 | |
| Net interest paid and tax | (114.9) |
| Capital expenditure | (323.2) |
| Changes in working capital and other | 29.0 |
| Free cash flow | 469.4 |
| Net investments | (108.1) |
| Asset sales & divestments | 3.7 |
| Operating and investing cash flow | 365.0 |
Andrew Michelmore noted, “Importantly, the excellent result from the MMG assets was achieved while maintaining our commitment to the highest standards of health, safety and environmental management.”
MMG recorded significant improvements in its key measures of workplace safety, with the Total Recordable Injury Frequency Rate (which measures the number of recordable injuries per million man-hours worked) fell from 6.3 in 2009 to 4.7 in 2010.
“We are pleased with the improvement in this key indicator of workplace safety, but further improvements are possible, and we will work hard to make 2011 a year of further improvement,” he added.
MMR’s Balance Sheet as at 31 December 2010, which is summarised in the following table, is still relatively highly geared following the acquisition of MMG. Subject to market conditions, the Company intends to exercise a portion of the Specific Mandate granted by shareholders to raise capital to repay inter-company debt, reduce gearing and for other corporate purposes.
| (US$ million) | |
| Cash | 398.2 |
| Property, plant & equipment | 1,671.5 |
| Working capital | 380.1 |
| Other assets | 499.4 |
| 2,949.2 | |
| Gross borrowings: external | 696.7 |
| Gross borrowings: internal | 491.6 |
| Other liabilities | 2,415.8 |
| Net assets | 533.4 |
Retirement of Chairman
Downloads
Media_Release_2010_annual_results_en_clarification (PDF 391kb)
MMR_2010_Annual_Report_Final (PDF 8mb)