Metair Investments Limited (MTA) Earnings Call Transcript & Summary

Afternoon, everybody. Welcome to Metair Investments Annual Result Presentation for the Year Ended December 2019. We're extremely grateful to be able to bring what we believe a very good result to you in difficult circumstances, as we deal with the fallout of the coronavirus. And as a consequence, we also had to change then the format of our presentation today. We had to move away from our normal face-to-face, in-person presentation at the JSE to the webcast. And as you know, we always say, the Metair result is best understood if it's read in conjunction with our integrated annual report, and we're proud to say that we did produce it. Sad not to be able to hand it over to you today. But it is available on our website, www.metair.co.za. Secondly, it's important that you download the result presentation that's on the same website, www.metair.co.za. Unfortunately, today, I'm going to veer from the script. I think circumstances require that we not force the presentation totally in line with the slide that we prepared. Because we've been advised that some of you only have 15 minutes availability on the webcast because of, obviously, other serious market concerns and announcements that you need to address. And I will make a high-level summary of the takeaway of the results in these first 15 minutes. So therefore, I got to apologize if some of you that's going to be available for the hour are going to hear some repeats, but it's to be able to bring what we would like the main messaging from the result across to you as soon as possible. So the result is best understood in line with our integrated report, our sustainability report that's also available today. I do believe that we produced the best integrated annual report that we've ever produced. And for that, we want to thank the Metair team, especially Sanet and Claude for the input on this. And it's also important that you understand the verbal overlay of the result presentation and the one-on-one meetings. As a consequence of what's happening with us, we also had to cancel the one-on-one meetings. And they will be replaced with teleconferences. I am going to encourage you to please take up the one-on-one meetings when it's appropriate and when you feel that it's safe in your environment and that we can do it. And we do -- Sjoerd and myself do acknowledge this year that it'll probably be a prolonged period in getting to full understanding not only of the results, but also the consequences or the effects or the opportunities that we have coming from the coronavirus. And we committed to be in this process for longer to give you an opportunity to fully understand our business. So thank you for taking the time. I also want to just thank our leadership core team that's either on the webcast today, but also here in person. I wanted to say in studio, but we don't have a studio in Metair. It's in office. Leadership in crisis time like this is everything. So Brand Pretorius, our Chairman, is here with us today. Brand, thank you for your leadership and continued support and guidance and stability that you bring us in these periods. But leadership in Metair comes through a number of governance structures. So we've also got the leader of the remuneration committee here, Thandeka Mgoduso. Thandeka, thank you for your attendance. Then on the webcast, we've also got Manfred Muell, the Head -- the Chairman of Social and Ethics Committee. And a very important aspect in today's understanding of business is obviously, the ESG portion of the business, that we think the coronavirus will have a bigger effect and a bigger focus on. So Manfred, thank you for that. We also have on the webcast, Michael Flemming, responsible for Audit and Risk Committee; and then also, Billy Mawasha. Billy is the Head of Investment Committee. But Billy is also heading up the special project that we're embarking on to see what's the best way to unlock shareholders' value, especially of importance today in the current market conditions and current share prices in regards to the valuation and the strategic review of our energy vertical. So we're very happy that the senior management are here to support us. And that it's important that we maintain our focus in the business. So what is the high-level takeaways that we would like to get across with you in the next 10 minutes that I have, then if I've only got 15 minutes to get there, because we believe that we're bringing a very good result to the market. In difficult circumstances, we've had a turnover growth, significant turnover growth in both of our verticals. And turnover growth was obviously very important. We've managed to achieve it, I think, in the right areas in our 2 different verticals and the energy vertical that comes from our local aftermarket positions in-country in each of our energy vertical battery businesses. That is the core flywheel and the most important portion of our businesses when it comes to market penetration, brand recognition and margin expansion opportunities. So fantastic in-country performance, especially again from Mutlu in Turkey, had to overcome a 9% devaluation in the currency. It's managed to beat the currency devaluation once again. So continued resilience from our biggest overseas investment with Mutlu. But also then in our automotive components business, good volume growth, not necessarily from our traditional big customers but new customers that's come onto our customer portfolio but also from product value expansion. And it shows the significant technology trends that -- in the automotive components business, we've got the benefit of volume growth but also the benefit of value growth in product, as the products become more complex and also adjust to the new environmental requirements in business. Fantastic cash generation. We've had an EBITDA generation of ZAR 1.4 billion, cash generation of ZAR 1.2 billion and free cash generation of ZAR 550 million. That's very good for us, especially in conditions like this, and it's allowed us to bring what we believe is an excellent dividend to the market, an increase from ZAR 1 to ZAR 1.20 per share. It represents a 20% increase in the dividend declaration. We've also achieved for the first time ever on Metair a combined group Level 2 BEE empowerment score that give us opportunity, and it's been an accelerator in us obtaining new business. And I think that's the other takeaway from today's result. So although we bring results to you in a very difficult market, we bring it from a background that we've obtained significant business that will be introduced into Metair in the next 2 to 3 years, with an approximate ZAR 650 million capital investment in the automotive components business but stay with us on the income line for the next 7 years. And some of those contracts -- individual contracts range in the region of 14 -- ZAR 12 billion to ZAR 14 billion, and it's got the opportunity to expand our workforce by 50% to 60% and bring job creation, depending on the volume -- final volume position from our customers, anything from 3,200 to 3,400 jobs that's being created. And I think that's a fantastic position to bring results to the market. But the reality is, is that we also got to talk to you about the crisis. We are in an emergency. And how does the coronavirus and the corona crisis impact our business and what do we see in the future? First, we would like to just talk about the stages of the crisis. In our mind, the crisis has got 3 stages. The first one that we've been exposed to is from the beginning of January already as the Coronavirus breakout happened in December in China. And we were threatened with supply chain issues to our customers, and we had to make plans for alternative sourcing and supply, that we've been in the coping phase already from the first week in January, finding alternative supply routes and being able to switch some of the critical products that's built into our products that supply from China. The second phase, obviously -- and obviously, the different countries and different regions are all now still in the coping phase of the coronavirus. Probably China is the only one that's starting to come to the design phase or the construct phase where they're looking at post-coronavirus effect on the business. That's the one that we're looking forward to. Because the construction phase or the design phase is as we adjust to the new reality of our business, that's the one that will make the transformation in the business, and that's the final phase. So from a transformation point of view, we believe that the crisis can have 2 effects on our business. It can enhance our position in the market or build on our position to the market, our structural position on the market, or it can be tracked or [ derived ] from our structural position in the market. Our current feeling is that it's actually enhancing and building on our fundamentals in our business, especially in regards to vehicle manufacturing in South Africa as we predict a 40% potential growth in volume in the next 2 to 3 years. And this comes from the interaction with our customers that we had during the coping phase, where most of them have been discussing with us how can we shorten the supply chain, how do we then use more local commodities, how can we produce more locally, and if the world are becoming less globalized and more varied with possible more restrictions on logistics supply chain issues and overseas suppliers and imports, how do we deepen our localization and supply within the South African environment. So that feeds on the fundamentals why we were able to bring in the result to the market, also with new business. And so our current conclusion is that falls on the fundamentals. Where we finally land, obviously, will depend on what happens in the reconstruction or the transformation phase post the coronavirus. Also, I'd just say we prepared a lot of questions during this morning already on where do we thing business will shut down, how will it happen. Firstly, we're very supportive of the measurements that government has introduced. We think they've been very responsible and responsive in regards to the actions that they've announced. We're making our vast resources and infrastructure available, like our clinics, the reach that we have with people, our communication and training centers to be able to focus our communication as of today. We want 95% to 100% of our effort in regards to communication with employees to be about health prevention and learning and education in regards to the coronavirus to avoid it, to contain it, to control it and to treat it. We're also making available our clinics and our facilities in regards to monitoring and possible detection. Should we have it, it is our target to obviously keep the infection rate down as low as possible. We do have a challenge that the principle of social distancing is against the social construct of business, especially on the manufacturing side. Because our business design and especially manufacturing is about social cohesion and teamwork and proximity and location. We did a survey in our businesses this morning. It's possible for us to keep to the social distancing requirement in our energy vertical businesses because they're more continuous manufacturing flow systems where we can constantly have 2-meter separation between individuals. It's bigger factories and it's mass production and continuous manufacturing with a lot more automation and integration. While on our automotive component side, it's based on proximity closed-cell and assembly-cell manufacturing. We think that we can -- we will struggle with 30% or 40% of our people to be able to apply in the work environment the social distancing because people need to work closer to each other than the 2-meter requirement. But therefore, we've installed very stringent hygiene and assembly protocols to be able to mitigate any issues in this regard. We're also grateful for the guideline that was put out this morning by the Department of Labor on workplace preventative measures and actions that we need to take to counter and to delay and to control the possible outbreak of the coronavirus. We see it as a partnership not only with our business, but also the communities and government that we are in. And we're fully committed to make our resources available to support any actions that we need to take. We do believe that, however, there will come a point where production will have to be halted. Production halts can happen in 3 instances in our environment. The first one, obviously, is a supply chain challenge. As you know, some of the overseas manufacturers are shutting down because of health and safety -- escalation of health and safety issues. We can have that in our environment as well that we need to shut down because of the escalation on health and safety requirements. The third shutdown that will be inevitable is the market reaction. If the market softens in demand, there's always a match in reduction in manufacturing in accordance to demand. So the reality that we face is that during this process, while we're still in the crisis and still in the coping phase, that shutdowns are going to occur. We are prepared for them. And what effect they're going to have on the business is too early to detect or predict, and it will be irresponsible for us. But what we would like to achieve is a [ constant ] market approach, where we would like to delay the response in delayed production or the halt of any production on a pure market demand and supply driver. That will be the first [ price ] for us, that we only stop producing when the market needs us to react because of demand softening of the supply chain. I hope that helps you to understand how we're approaching the crisis. We are fully hands-on. We are fortunate that to date, we've not had any stoppages of any supplies. But we do believe that it will be part of our future. Then just to allow time, so it took me 1 minute extra. So for those of you that need to go off the line, I hope that you may have got the major takeaways that we'll now go into detail in the result presentation. But to allow a little bit more time in question and answering, I'm going to just focus on 5 or 6 slides in the result presentation. Just to focus that we have time and that Sjoerd can have a little bit more financial explanation on a very, very good result, and we don't lose the emphasis of the excellent financial results that we have achieved. So just on the slide, I will now give slide guidance. The full slide pack is available for the one-on-one interactions, but also for the teleconferences. Because of the approach that I had to take today, please take us up on the office on the teleconferences and later one-on-ones, so that we can work for each and individual slide in our result presentation. I wouldn't like to walk away from Slide #8. That's the image that we're bringing our result to you. I promise you Metair did not predict the coronavirus. There is a little bit of a resemblance of our image to the coronavirus. We believe it's very relevant. That means that we understand the adaptiveness that we need to make in our business to situations like this, but also that there's big mega trends in the world in our business, especially the automotive industry. One of the biggest industries that are subjected to mega trends, especially in regards to electrification of vehicles and the greener technologies, and Metair had to be technology ready. So we're not making a technology statement with our image by saying that lithium-ion is the future. We're saying we need to be lithium-ion ready. So our image represents the different elements in a lithium-ion battery. That is the pouch cell, the outer skin in the PVC material. The silver that you see there, then it's the aluminum foil that you see. That's the base coating material for the -- both the copper cathode and aluminum anode that carries the active materials of the battery. And then there's the connectivity between all of them to make sure that we have the right energy in our new product. And all it's saying that although Metair believes that our lead acid business has got long relevance still, but we are technology-change ready. And that we've built 3 core competencies in our business. One was to get the technical or the chemistry knowledge in regards to lithium-ion. The second one was to get the component automation and material sourcing knowledge in the business. And the third one that we are busy with now is to have the manufacturing expertise to apply lithium-ion battery products and to be ready for switch. And the paragraph that I wouldn't like to go unnoticed is on Slide #9 at the bottom that speaks to the strategic review that the Board has embarked on. We're saying this and I think it's important because it's also a further slide that I'm going to touch on that. Following the strategic review, the Board has concluded that its response -- that a possible managed separation of the 2 verticals could unlock shareholder -- value for shareholders. What we're saying that is we still believe that our value position in the market is not correct, that we undervalued, and we do feel that we have the responsibility and the opportunity to do a validation of our value position in the market, especially in regards to the energy vertical, and that is continuing. Slide #12 -- just on Slide #6 -- Page #6, Slide #11. I'm going to read something verbatim. I think today it's emphasized that it's even more important today in our business. You can see that the photo there with me and Brand was obviously taken before the coronavirus. Otherwise, there would have been 6 meters between us. And then either me would have been on the photo or Brand would have been on the photo. So -- but I think what's important is what we're saying next to that is that, "Navigating this new world of ours, with mega trends and mega shifts and demands and markets is complicated by major tensions in trade, political power, economic positions, equity and life balance and that requires a special business." I think that was enhanced. What's just happened with us in the coronavirus environment, that's even more true than the time that we wrote this because we also now have mega reactions. The world and demand and the trades have mega reactions to the coronavirus. And to be able to deal with this, it needs a special business. And what does that business look like? It must be a fully connected, responsive, agile, principled and technology-based business, guided by a commitment to best practice in governance, environment impact -- environmental impact, sustainability, but also health and safety. And I don't think that the coronavirus overemphasizes this. It's actually brought this to the fore that we must have best practice principles, especially in health and in safety. And I think it's emphasized by what's happened in the coronavirus. But what does it need then? It needs capable, intelligent, committed ethical, knowledgeable and exemplary leaders moving highly affected -- effective, well-trained, fully -- fairly treated teams that best know when and how to respond. And I couldn't emphasize more. Post the coronavirus, the response from business and the directions that we're going to take are going to be very, very important. So I think it just emphasizes the current circumstances that we're bringing the results to the market. Slide #12 is a very important one. I've highlighted most of them already. It gives you the headline earnings growth of 3% to a record result for us ever. Metair in the last 4 years, 5 years has been able to every year bring a better result to the market. But we only reached a record level last year as the high -- previous high watermark was exceeded. And again this year, we've managed to achieve it. Therefore, the good dividend declaration of ZAR 1.20 and all the cash flow highlights are there for you, but I want to reemphasize the excellent generation from a cash perspective. I'm not going to spend time on any of the other slides. They bring out the salient features of the result, except Slide #16. I think in Slide #16, we try and summarize each of the verticals, and the important one in the energy vertical. I'm going to just reemphasize that, is that we've been able to continue FNB on its recovery road. We've had a very resilient performance out of Mutlu in Turkey. We've installed our first lithium-ion line. We've embedded our technology knowledge in the group in regards to lithium-ion. We've had vehicle growth opportunity and volume opportunity that also spilled over from the automotive components business into the energy vertical because we do supply batteries to those vehicles. We've got continued local market, and that's what I want to finish with. The flywheel in our energy vertical business is our own local aftermarket penetration and brand recognition and brand positions. And we've been managing in-country in all of them to expand it, and I want to thank the management teams that's also on the line, and we did have an MD's conference this morning thanking them. Because without those teams, it would not be possible for us to bring this magnificent result. And again, team, I know you guys are on the line. You're also on the line now with your executive team members. From the Board, from our shareholders and from us as Metair, we really want to thank you that you've enabled us to bring these salient features with such a good set of results to the market, especially in the fourth quarter, where we've asked you to dig deep, especially in the cash generation and preservation in the business as we saw some challenging times at the end of it. The only thing that I want to highlight on the ESG portion that we're very, very proud of. Obviously, health and safety of our people is important. Zero fatality rate is an absolute target, but to significantly come below an LTIFR of 1, with a 0.77 long time injury frequency rate in our business. Far below, almost 30% below the target or better than the target that we set ourselves is a significant achievement, and we want to thank the focus on the subsidiaries on health and safety. Then I'm just going to jump through the governance issues and the design. It's therefore noting, and discussing with various stakeholders, we obviously will take different time with different of you depending if you're new or old or considering shareholder or entering shareholder in Metair. You've got different questions on that. But I think the strategic review, those are particularly important for everybody. Before my 0.5 hour is over and I can hand over to Sjoerd on time, and that is on Slide #34, so we've done -- the Board has embarked on a strategic review. The strategic review outcome was that the 2 different business verticals require 2 different strategic responses and support structures to be able to maintain their relevance into the future. And therefore, we decided to investigate what is the best possible way of separating the 2 verticals. We do acknowledge that it is a strong linked shareholder decision and choice, and we've got a responsibility to only bring a possible separation to the market if it meets value expectation both of Board and shareholders. Therefore, we've identified a 6-stage valuation process, and it can only turn into a separation process after stage #5. And it's a 3-gated process. The first gate, we've managed to get through, and that was stage 1, where we tested the market. So there's interest from the market, and that we've completed already because we thought that guidance was what we believe quite significant interest in the energy vertical. We've decided to continue on stage 2, and it's to prepare the detailed IM, information memorandum, for potential interested parties to be able to put a valuation of the vertical on the table. But we're also doing it in conjunction with a vendor due diligence. From that, you can guide that some of the interested parties are obviously strategic partners, and therefore, we cannot do purchasing due diligence. We have to do a vendor due diligence, as some of that is strategic opposition or big players in the market that could have an interest in the Metair energy vertical. Part of our due diligence process is also a very extensive commercial due diligence because we also believe that the market wants to see, especially you as a shareholder, confirmation of our market position in regards to technology outlook, and when will -- how long the relevance of lead acid will be in the market, and when and how and which markets will the technology shift to lithium-ion come first. So a big portion of the vendor due diligence is also commercial due diligence. So it's not wasted. It's something that we will use extensively in the group for planning of our future strategies and to also see if our understanding of the marketing technology is correct, but it is third-party independent verification of a particular market view that we do have. That will bring us to stage 4. That's another stage gate where we can decide to continue or to terminate the process, and that's the value indication. Value indications that the Board would consider will have to meet our value expectation and market expectation and market peer multiples. So I'm really clear that it's focused on shareholder value extraction. If that gate is passed, then only will we come to shareholders for your interaction, and that's another stage gate where the responsibility and the opportunity for shareholders to decide on the future will be passed to you, but that's another stage gate. And depending then what shareholder decision is we can decide if we continue on stage number 6 or not. With that, I'm concluded, I'll come back at the end of the results presentation to you just on the outlook and take the answers and questions -- take some answers and do some -- give you some answers and take some questions in regards to any of the items that you want clarification on. Thanks, Sjoerd.

Thank you, Theo. So let's have a look at the more detailed background to last year's good performance. So firstly, revenue grew 9%, mainly as a result of good volume growth in South Africa. The local automotive production grew by 5%, mainly due to strong -- continued strong exports, value improvement, as Theo mentioned, but also market share improvement as we continue to increase localization in South Africa. And then secondly, in the energy storage vertical, we saw good volume growth across all channels. With the exception of industrial, which I'll discuss later in the report. So overall, very pleasing from a volume perspective. Operating profit fairly flat, 1% up on last year; but automotive components, a strong 6% growth up to ZAR 538 million. And then on the energy storage side, slightly down, 4% down. But excluding fire-related profits that we had in 2018, the performance was actually flat, and I'll explain that flat performance in detail. And we're also happy not to have fire-related profits this year. From a margin perspective, we did see some margin erosion from 2018 down to 9.1%. And that's across both our verticals, automotive components declining by 0.5%. And then on the energy storage side by 1.1 percentage point, and I'll go through the background of that later in the detail. Return on invested capital remained flat despite continued investment in our future, which we think is a good performance. Automotive components continued to improve up to 33.4% for the year. And energy storage declined to 16.5% from 19% the previous year. So on to Slide #37, although operating profit was flat but then EBITDA improved by 5% to ZAR 1.4 billion. Automotive components, up 8%; energy storage improved by 1%. Headline earnings per share up 3%, mainly assisted by some share buybacks, which we concluded in the first -- the second quarter of 2019. Free cash flow was a good performance, so an increase of ZAR 66 million; group free cash at ZAR 544 million. Components is the big driver for the free cash at ZAR 400 million generation. Energy storage of ZAR 167 million was slightly down on last year, but also includes a big -- significant investment in lithium-ion, which obviously dragged that free cash flow generation down a bit. As I mentioned, operating profit down 0.7 percentage points, and we'll discuss that later, and the return on invested capital at 13%. On to Slide #38. I'll just touch on a few items. Firstly, our effective tax rate increased to 24.5%, up from 22.2%, and that's really a function of the extent of capital expenditure in Turkey. In Turkey, we do get good government tax incentives for new technology investments. And 2019 was not a big year for investment in Turkey. From a foreign exchange gains and loss perspective, so the total realized and unrealized foreign exchange loss for the year was ZAR 33 million, flat on prior year. And I think given the volatility in U.S. dollar and Turkish lira as well as the South -- the rand, that was a good -- was a fairly good performance. Net interest expense was ZAR 41 million higher from the previous year, and this is really a function of interest rates in Turkey. So during 2019, interest rates went as high as 40% in Turkey. And I'm glad to say that in 2020, we're down to very much normalized interest rate of around 10% to 12% in the market. So that's very good. And from other income -- other operating income perspective, you'll see there's no insurance proceeds on fire, which is good. Government grants really flattened on last year. Derivatives, just refer to our FEC revaluations for the year. And other, also fairly stable. Then on Slide 39. Headline increase of 3%, as I mentioned, assisted by a reduction in the weighted average number of shares of 3% net capital that we returned to shareholders effectively. And despite the 9% devaluation in the Turkish lira, lower export margins in the energy storage business as well as the low demand on industrial in energy storage, we think it was quite a good performance. Half year on half year was impacted. We had a strong automotive components performance in the first half of 2019. We did see some pull forward of production in anticipation of the wage negotiation for the industry and then a softening of that -- those volumes in the second half of the year, which we will discuss despite that volatility, to still come out with a good result is very good. On the earnings per share, the only impact is a -- the difference between headline earnings and earnings per share includes an impairment of investment in Moll in Germany. Our associate investment historically has been very much OEM focused, and as they're changing their business to become much more aftermarket and lithium-ion business, we think they've done really well. But in terms of the business plan, assessment and full results in an impairment despite the business plan showing a return and an improvement in profitability. So the return on invested capital, 13%. So revised assessment of our internal cost of capital at 13.1%. So we're slightly behind our internal cost of capital at this point in time, which is obviously something that we will be looking to address. But the net debt was largely up due to some increased funding in Mutlu and especially for Rombat investing in the lithium-ion facilities and then further investment in working capital but very much limited, given the strong revenue growth, only an additional ZAR 100 million invested in working capital was good and a significant improvement from the half year position. Then on to Slide #40, balance sheet. Noncurrent asset increased mainly because of general capital expenditure, a total of EUR 13 million investment in the lithium-ion line to date. And then we also have leases, IFRS 16 leases, which have been capitalized of ZAR 103 million, so we're not significantly impacted by that restatement. And then obviously, the drop in the spot rate between the rand and the Turkish lira results in some devalued PPE on the balance sheet that was a 13% off, so that offsets the investment. And inventory management has been good. It continues to be a big focus area for us in the group, structural working capital improvement. And especially, Mutlu ended the year with a total 26.6% working capital as a percentage of turnover, which is very good. And even from a benchmark to the industry is excellent. Higher aftermarket sales in Mutlu in the fourth quarter contributed to higher receivables at year-end, which is not something that we want. And then the net cash position was strong due to ZAR 1.2 billion cash generation, which is significantly higher than last year. On Slide 41, just on borrowings. Borrowings increased due to ongoing investment into new projects as well as South African as well as international projects. I mentioned the lithium-ion investment, and we raised external debt of about EUR 11 million for that. And as I mentioned, the completion of the share buyback utilized another ZAR 45 million in 2019. And then if we can move on to Slide #42, just looking at the balance sheet working capital. So there's a slight anomaly when you look at the movement in balance sheet working capital year-end to year-end. We do, in our assessment of free cash, add back the gains that we get from currency. So we don't take the benefit of that. So when we mention ZAR 100 million investment, that excludes the benefit of the move in Turkish lira exchange rates. But on a balance sheet to balance sheet basis, the spot working capital improved and decreased by ZAR 143 million, which is really good. And from a days perspective, a 12-day improvement in our structural working capital is something that we're really pleased with. Then on Slide #43, just an analysis of our debt. Debt levels have remained -- net debt has remained very consistent with 0.9x EBITDA. Lots of headroom at the moment, and certainly, from a liquidity perspective, this is very good. And on Slide 44, just to look at some of the detail on automotive component vertical performance. It was a strong vertical performance with revenue improving by 11% to ZAR 5.6 billion; free cash flow, up 21% to ZAR 400 million, operating profit increased by 6% to ZAR 538 million. Margins did decline slightly by 0.5 percentage and then return on invested capital increased 33.4%. So most of our operations maintained or increased profitability but our efficiencies were impacted, however, in anticipation of the strike I mentioned. There were higher call-offs from OEMs, which resulted in premium costs in the production of components. And then post the strike -- not the strike, the wage settlement, we did see some volume decline in volatility, which impacted our efficiency. And as a result, we did see that slight margin decline to 9.5%, which relatively, to global and peer averages, is still very good. And overall, vehicle production increased by 5%. Our main customers or key customers improved by 4%, and the big improvement or big increase came from [ VW ], which increased from 133,000 vehicles to 158,000 vehicles. Our largest customer, Toyota, was flat. And then Ford then experienced some supply disruption in component manufacturing in the South African market, and therefore, the volumes did decrease a little bit in the last quarter and they ended the year below 2018. Then Slide 45. As we mentioned, the operating profit margin reflected a little bit to 9.5%, so slightly higher than our previous market guidance on 7% to 9%. But we're very glad for the conclusion of a new 3-year wage agreement, especially in light of the number of projects and vehicles and model launches that our OEMs will be conducting and executing on over the next 2 to 3 years. Then looking forward to the energy storage vertical on Page 46. Despite a 10% drop in average LME prices, LME price dropped from $2,250 to just below $2,000 a tonne. Revenue still grew by 7%, largely as a result of a very strong local aftermarket performance. Our local aftermarket is our most important and most profitable market in all our businesses, and those volumes grew by 13%. Overall automotive volumes, which include exports in OEM volumes grew by 7%. But we did experience some tough trading conditions in our Energy Storage business, especially in export and industrial markets, and I'll touch on that a little bit later. And as a result, the operating profit declined by 4% to just over ZAR 660 million. So weak industrial demand in South Africa and Turkey. Our industrial business profitability declined from ZAR 82 million down to ZAR 31 million, that was the big impact in the current year profitability. Energy Storage, our local Auto aftermarket margins increased from 9.8% to 10.6%. So we have to have our biggest and most important market not only grow in volume terms but also in margins. That was a very good performance, which we're very pleased with, the total increase of ZAR 85 million operating profit in that segment. Specifically to the export market, export markets as well as some, to a large extent, OEM, price recoveries are largely driven by commodity price movements. Our international businesses are very seasonal, and the last quarter of the year is our highest season. And what we experienced in the end of 2019 is a sharp decline in LME pricing. And then from a price recovery, we're on the wrong side of the equation, and hence, we do see some significant margin pressure on net downward curve. And it's more pronounced since it's in a high season. So the majority of volumes on the wrong side of the LME. So over time, it typically normalizes. But certainly, in 2019, that was quite a major impact on margins. And therefore, our return on invested capital declined to 16.5%. So looking at the -- on Page 47, and on the operational volumes. Total automotive volumes were up 7.4%, mainly as a result of the strong Mutlu aftermarket performance. To an extent, also recovering from a weak 2018 result. And so, there would have been some carryover volumes into 2019, but the market was very strong. And then also pleasing, despite OEM production in Turkey declining by 6.5%, Mutlu grew its market share, especially on start-stop in AGM production. So finally, ending the year with a growth of 3%. And then export volumes did grow significantly, about 30% up on the prior year. We did mention previously, it is a big focus area for us to become more competitive in exports. We've changed strategy to secure more of that market and then we did grow quite nicely. Unfortunately, some of that volume did come at a loss, so about 200 -- 170,000 to 200,000 batteries we sold for -- under a loss-making contract. And the total impact of that is about TRY 10 million to TRY 15 million. That contract has been stopped. And I think it's again a consequence of the pricing decision made on LME curves, and unfortunately, that did not -- which did not -- and the combination of LME and ForEx, which did not materialize, and we exited that contract as soon as that became evident. Rombat OEM volumes remained flat with the margin increase due to new business obtained from Ford. Aftermarket growth, again, was very pleasing, improving by 15%, a small improvement in demand, but also growth in market share. And then export volumes were certainly under pressure, especially in the last quarter of the year. And as I mentioned, LME pricing impacted our ability to sell products at prevailing LME rates. And as a result, we did not want to reduce our pricing to the level where our margins really are impacted there tremendously. First National Battery OEM volumes improved 1%. Aftermarket volumes grew 1%. It might not seem that significant, but it's reversed a declining trend that we've seen over the past few years, so that's very pleasing. And the new branding initiative over the last 12 to 18 months on product as well as channel is helping FNB recapture some of that lost market share. Export volumes were -- declined slightly, but mainly due to currency accessibility issues in some of our export destination. Then looking at the segmental margin on Page 47 quickly. Automotive exports' operating profit decreased by 26%. So that's ZAR 61 million, mainly due to the overall unfavorable LME pricing, as I mentioned, which impacts our cost recovery and particularly in the Rombat environment as majority of the business is either export OEM or OES related. Rombat, and I suppose across the group, was also impacted by lower LME lead prices, so that -- the impacts are recycling profitability. And I already mentioned the Mutlu loss-making contract on exports. The local aftermarket in total performed very well in all markets. And local aftermarket demand, volumes and prices were very strong, cushioning us against the loss in the export margins. Industrial, as I mentioned, declined by 51% due to weak industrial demand and tough economic conditions in Turkey and in South Africa. And looking finally at the company level performance, the variability in LME prices, especially during the peak season, impacted on lead market recovery cost -- cost recovery from the market, especially in export markets. The general economic downturn in our developing market also impacted our industrial demand. So the company level FNB's profitability remained flat -- largely flat from prior year. It would have been significantly better had we had a better industrial performance in South Africa, but automotive was certainly strong. And then despite the negative currency impact, the 9% on average for Turkey, Mutlu, again, managed to offset the majority of that currency loss. In rand terms, Mutlu's operating profit decreased from ZAR 428 million to ZAR 413 million, but excluding the prior year one-off gains from the fire, actually improved by 5% year-on-year, which is very pleasing. Rombat operating result was down 28%, and that was mainly the lowest -- lower smelter profits as well as the declining LME brand -- trend, which was impacted by recoveries as mentioned. And then we have a new category, Other, not a new business that we acquired, but it's actually an acquisition-related provision. So when we acquired Rombat, we were required to put an environmental provision into the acquisition accounting. The legislation in Romania subsequently changed, and we have released that provision. That's effectively ahead of this related adjustment. So in summary, it's a very pleasing result from a volume perspective, especially in the aftermarket. It could have been higher if we had more favorable LME movements and especially given the peak season at the end of the year, and if we didn't have the loss-making contract. And with that, I'll hand back to Theo for the prospects.

Thanks, Sjoerd. I think to allow for time, I'm just going to be quick on the prospects today for discussion at Slide #52 and 53. We need to emphasize that from operational sort of update that we had a challenging start to the year. We all know about Eskom and our load shedding that's impacted on our ability to produce but also installed some maintenance costs into our facilities. We've had a major outage from a labor perspective, as one of our customers who's got a 10-day labor unrest, and then the volume takeup from Ford due to various reasons that have been challenging. And we've also been in a wage negotiation in Turkey. I can positively respond on that one, that we managed to conclude it successfully and now have a 2-year wage agreement from a stability point of view. It's very good for us for the new project launches that we involved in any -- in all of our businesses, that in South Africa we've got 3 years of vision in regards to the cost and the stability and in Turkey, 2 years. So what is our outlook? Our outlook from day 1 before all of these special events and issues that we have today was to sustain ourselves. Therefore, actually, very important to see in our outlook statement is to say that we always aim to sustain ourselves, excluding any special project cost or resource or any special event cost that might come forward because of the coronavirus. So our prospect outlook is that we believe that we build a very sound foundation to launch the platform -- to use as a launch platform for the investment in our new business. But a big focus on our project management cost, our engineering costs and our special implementation cost and commissioning cost as we make ourselves ready for those projects. It's about 4 major contracts with 4 different contracts -- customers that's spread over all of our businesses, and we've mentioned the most significant one. We -- unfortunately, in this current market position, our customers are very sensitive in regards announcing specific volumes, specific models, specific names and specific timing because it does increase the competitiveness in both the local and the export market. And therefore, unfortunately, our result commentary had to be turned down, where we can't specifically mention the volumes for a customer with that brand and their planned launch date because we've got to honor their confidentiality and market positions. But we can assure you it's constantly being monitored and being moderated by Metair and by the Board, to make sure that our future investment in new vehicles is the vehicles of choice and the key vehicles for the customer that's got the least opportunity to be dropped from product portfolios in the future. We've learned from past experience in that regard. So that concludes it. We would like -- I believe we do have some questions already that we can read out and answer, and then if you can please send through any additional questions that you have. So anything from the conference call, the moderator can relay any questions from the conference call, [ any ] questions from webcast.

[Operator Instructions] Sir, we don't have any questions at this change. And I hand it back...

That's the first for us in our 15-year presentation of results at the Metair level. I hope we're not all in shock. And therefore, we want to reiterate that please keep to those time slots in regards to the conversion of the one-on-one meetings to a teleconference and then please make yourselves available for us in the future for one-on-one interactions. And we need to -- and we want to maintain the depth and level of our interaction. We've also got nothing from the webcast. We want to thank all of you for your participation today. And we look forward to the one-on-one actions (sic) [ interactions ] in regard to the teleconference that will start tomorrow. Thank you very much. And may you all be safe and look after your health. Thank you very much.