Limited Annual Report 2011 For the year ended 30 June 2011 ABN 86 088 471 667 For personal use only Innovative engineering brought to life Sedgman Limited Annual Report 2011 1 About Sedgman Sedgman Limited (ASX: SDM) was established in 1979 and is a leading provider of mineral processing and associated infrastructure solutions to the global resources industry. Specialising in the design, construction and operation of coal handling and preparation plants (CHPPs), Sedgman is recognised internationally for its mineral processing and materials handling technologies. Sedgman listed on the ASX in June 2006. The company has almost 1,000 personnel and services the global coal and metalliferous markets by offering innovative Projects and Operations capabilities. Head Office is in Brisbane with other Australian offices in Perth, Townsville and Mackay. International offices are established in Beijing, Shanghai, Ulaanbaatar, Santiago, and Johannesburg, targeting the growth regions of China/Mongolia, South America and southern Africa. Sedgman won both the Premier of Queensland’s Export Award and the Australian Export Award for the Large Services category in 2010 in recognition of the company’s success and innovation in exports. Notice of Annual General Meeting The Annual General Meeting of Sedgman Limited will be held at The Chifley at Lennons, 66 Queen Street Mall, Brisbane, Queensland on Monday 28 November 2011 at 10am. A separate Notice of Meeting and Proxy form will be sent to shareholders. For personal use only Front Cover: Lake Vermont 800 t/h CHPP, Bowen Basin, Queensland, Australia. Client: Lake Vermont Resources. Inside Cover: Bengalla 1,200 t/h CHPP, Hunter Valley, New South Wales, Australia. Client: Bengalla Mining Company. 2 Sedgman Limited Annual Report 2011 SEDGMAN LIMITED ANNUAL REPORT 2011 Table of Contents The Year in Review 1 FY2011 Highlights 1 Chairman’s Message 3 Report from the CEO and Managing Director 5 Company Overview and Strategy 7 About Sedgman 9 Strategic Direction 10 Corporate Structure 11 Business Model 12 Business Activity 13 Projects Business Unit 15 Operations Business Unit 16 Sedgman in Australia 17 Sedgman in The Americas 19 Sedgman in Africa 20 Sedgman in Asia 21 Global Opportunity 22 One Sustainable Company 23 People and Values 25 Health, Safety and Environment 27 Community 28 Innovation 29 Feature Article: Coal Stockpiles and Desert Dust 31 Corporate Governance 33 Board of Directors 35 Senior Executive Group 37 For personal use only Financial Statements 39 ASX Additional Information 111 Corporate Directory 113 Sedgman Limited Annual Report 2011 3 ► BACK TO CONTENTS 1 | The Year in Review FY2011 Highlights Achievements Operational Highlights ► Continued market leadership with greater ► Organisational review complete with Coal and than 50% market share of coal handling and Metals divisions merged into Operations and preparation plant (CHPP) projects in Australia Projects business units (formerly Operations and ► Involved in the delivery of over $2.0 billion of Engineering Services) CHPPs over the past 7.5 years ► Strong performances across Operations ► Processed 19.85 Mt/a of coal under 7 business unit as it diversifies and expands its operations contracts and 8.68 Mt/a of ore under business model 5 operations contracts ► Record revenue levels in Projects business unit, ► Progressed global growth strategy with major with over 10 major projects underway projects in all operational regions including ► Studies and early engineering at record levels for Mongolia and Mozambique – two of the world’s Projects business unit most significant emerging coal regions ► Personnel numbers increased by 29.5% to 988 ► Delivered strong financial performance with ► US$90 million EPC Boseto copper project under increases in annual revenue, reported NPAT and construction in Botswana shareholder dividends ► Delivered Ukhaa Khudag (UHG) Stage 1 CHPP ► Included in the ASX 300 Index, a ranking of project in Mongolia and subsequently awarded Australia’s largest ASX-listed companies US$12 million operational readiness and ► Successfully recruiting, retaining and motivating operations management contracts for the plant our people to facilitate operational growth ► Awarded $19 million EPCM contract for UHG ► Recognised for excellence at both the Stage 2 CHPP Queensland and Australian Export Awards with ► Theiss Sedgman Joint Venture (TSJV) won $145 wins in the Large Services category. million Lake Vermont CHPP expansion contract in Queensland’s Bowen Basin Challenges ► TSJV won $85 million Bengalla CHPP upgrade contract in New South Wales ► Coal operations margins impacted by record rainfall in the Bowen Basin forcing closure of ► Awarded $18.5 million CHPP design contract mines, which have since re-opened and $30 million procurement contract for Maules Creek in New South Wales’ Gunnedah Basin. ► Metal operations challenged by high maintenance costs and poor availability, but improved in Q4 following a Q3 operational review ► Engineering margins contracted due to three projects, which are now substantially complete ► Leadership team transition successfully completed with appointment of new Chief Executive Officer and Chief Financial Officer. For personal use only 1 SedgmanLake Lindsay Limited 700 t/hAnnual CHPP, Report Bowen 2011 Basin, Queensland, Australia. Client: Anglo American Metallurgical Coal. Financial Results Outlook ► Combined revenue of $555.1 million1, ► Company well positioned in the key international an increase of 65.1% on FY2010 results markets of southern Africa, China/Mongolia and ► NPAT (reported) of $26.0 million, an improvement the Americas with continued opportunities for of 4.2% on FY2010 growth ► Final dividend declared of 4.0 cps fully franked. ► Global outlook for coal and metals projects Total FY2011 dividend is 7.0 cps fully franked expected to remain conducive to Sedgman’s (FY2010 6.5 cps fully franked) short, medium and longer-term strategies ► Strong balance sheet with Net Cash of ► One-year pipeline contains 62 projects totalling $13.9 million. $2.2 billion and three-year pipeline a record $7.6 billion ► Order book at June 2011 totals $606 million2, including $252 million in Projects (executable over 12–18 months), and $354 million in Operations (contract terms vary from 1 to 10 years) ► Order book and one year pipeline combined has grown by $440 million on FY2010. 1 This represents revenue of Sedgman together with Sedgman’s share of revenues from Joint Ventures 2 Excludes major contracts signed after 30 June 2011 which included the US$24 million EPCM contract for stage 3 at Energy Resource’s UHG coal mine, and the A$22.5 million CHPP improvement contract at the Bowen Basin’s Middlemount coal mine. Order Book and One Year Pipeline EBITA Performance $M $M 3,000 2.8b 50 45 2,500 2.4b 2.3b 40 2,000 35 30 1,500 25 20 1,000 15 500 10 5 0 0 June 10 Dec 10 Jun 11 2007 2008 2009 2010 2011 1 year pipeline H1 H2 Projects Order Book Operations Order Book For personal use only Sedgman Limited Annual Report 2011 2 ► BACK TO CONTENTS 1 | The Year in Review Chairman’s Message FY2011 was a year of delivery. Sedgman successfully delivered projects in all four operational regions – Australia, Africa, Asia and the Americas. In doing so, Sedgman demonstrated that we are truly capable of servicing projects anywhere in the world. This success meant Sedgman kept true to our In Mozambique, Sedgman neared completion commitment to deliver results for clients as well as of engineering and procurement delivery at value for shareholders. By financial year’s end, the Benga CHPP for Riversdale Mining and followed company was in a strong position in our home base its earlier detailed design of the world’s largest of Australia and continuing to grow and mature in coal preparation plant at Moatize by providing delivering projects through our international regions. construction and commissioning support for Companhia Vale de Rio Doce (“Vale”). In Australia, Sedgman retained its technological and market leadership with greater than 50% market In South Africa, Sedgman progressed towards share of CHPP projects. completion of CHPP design and construction services for Xstrata Coal’s ATCOM East project Key contracts delivered or progressed to near near Johannesburg. completion during the financial year included Middlemount CHPP in Queensland’s Bowen Basin for Middlemount Coal and Narrabri CHPP in New Perhaps the best example in FY2011 South Wales’ Gunnedah Basin for Whitehaven Coal. of Sedgman’s ability to meet the Sedgman also commenced interim operations at challenges and deliver for clients and Middlemount upon completion of the plant with full operations due to commence in Q3 FY2012. shareholders was in Asia, with the Further in Australia, Sedgman secured major development of the first coal mine contracts through its successful Thiess Sedgman in Mongolia, the Ukhaa Khudag Joint Venture, winning the $85 million Bengalla (UHG) project for Mongolian Mining CHPP upgrade for Bengalla Mining Company in New South Wales’ Hunter Valley and the $145 Corporation (MMC). million Lake Vermont CHPP expansion for Lake Vermont Resources in the Bowen Basin. Sedgman Sedgman’s successful delivery of UHG Stage 1 also won $18.5 million CHPP design and $30 million CHPP project in Mongolia’s remote, unforgiving procurement contracts for Aston Resources’ Maules South Gobi Desert resulted in it being awarded Creek in the Gunnedah Basin. Stage 2 CHPP engineering, procurement and For personal use only construction management contracts, as well as its In the Americas Sedgman moved steadily towards first international operations management contract. commissioning the Bocamina coal handling plant The Stage 2 CHPP of the UHG project is at an and also commenced a range of feasibility studies advanced stage of construction. that have the potential to turn into projects. I acknowledge staff members who continue to Sedgman’s first African metals project, the Boseto work in the harshest conditions and around the copper project in Botswana, progressed on clock to deliver this project on schedule. Sedgman schedule with strong support out of the company’s engineering design is setting the standard for future Perth office.