| Wed 16 May 2007, 11:51 | | AFGRI - AFGRI Limited - AFGRI Posts 65 |
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AFR
AFR
AFGRI - AFGRI Limited - AFGRI Posts 65,6% increase in headline earnings
AFGRI Limited
Registration number: 1995/004030/06
Share Code: AFR
ISIN: ZAE000040549
("the company" or "AFGRI")
AFGRI POSTS 65,6% INCREASE IN HEADLINE EARNINGS
HIGHLIGHTS
- HEPS up 65,6% on prior year
- Group earnings per share up 45,4%
- Net cash generated from operating activities R537 million
- Acquisition of Daybreak broiler business
- Disposal of under-performing cotton ginning business
AFGRI posted a 65,6% increase in headline earnings for the year to 28
February 2007 in what managing director Jeff Wright describes as another
challenging year for agriculture.
In 2006 maize plantings dropped 40% over the prior year due to the low
average maize price of R725 a ton. This was largely due to a substantial
maize surplus from the prior year and the then strong rand. The result
was a maize crop of 6,6 million tons, which was 43% down on the previous
year`s crop of 11,5 million tons.
"The challenges of the last year brought out the best in our management
team and the business performed extremely well," says Wright.
The improvement in performance - with the exception of Handling & Storage
and International - was largely the result of a more buoyant agricultural
climate driven primarily by improved commodity prices. AFGRI achieved a
22% increase in turnover in its Primary Inputs and Retail businesses, and
a 27% increase in turnover in Financial Services. This, combined with the
continued focus on the reduction of fixed overheads and the improvement
in supply chain efficiencies, resulted in these businesses achieving a
R160 million improvement in profitability.
As well as increasing headline earning per share by 65,6% to 65,1 cents,
the Group lifted earnings per share by 45,4% to 59,9 cents (2006: 39
cents).
Turnover from continuing operations grew 20,7% to R6,4 billion (2006:
R5.3 billion ), while operating profit improved 33,5% to R670 million
(2006: R502 million).
Profit before tax was up 67% to R413 million (2006: 247 million). The tax
charge for the year was R68 million, up from R24 million the previous
year, resulting in a net profit from continuing operations of R345
million, a 55% improvement on the R223 million achieved the prior year.
Headline profit from continuing operations (before tax and after finance
costs) improved by R136 million, or 60%, for the financial year. Primary
Inputs and Retail, which make up the Producer Services business, reported
headline profit growth of 145% and 130% respectively. Protein, which is
part of the Products business, reported headline profit growth of 97%.
The improved performance from these businesses delivered a combined R185
million improvement in headline profit for the year.
Offset against this was a decrease of R88 million (down 44%) in headline
profit from Logistics Services, due to the decline in maize plantings,
which reduced throughput in AFGRI`s Handling & Storage facilities.
AFGRI `s International businesses - concentrated in Western Australia and
Zambia - had a particularly difficult year. Western Australian recorded
its worst drought in history. Despite this, AFGRI`s business traded
profitably for the year. The Zambian business has been refocused and is
now also trading profitably.
Producer Services benefited from higher volumes, improved gross margin
and cost reduction programmes. Financial Services had an excellent year
due to improved demand for financial services and judicious management of
the debtors` book.
A highlight of the year was the 200% improvement in the net cash
position, helped by a R415 million improvement in working capital and a
R150 million reduction in outflows to investing activities compared to
the previous year.
Another highlight was the exceptional performance from Animal Feeds,
which posted its best performance ever.
The acquisition of the Daybreak broiler business vindicates AFGRI`s
decision to re-enter this market. Daybreak is a particularly well run
business and performed to expectations. Its performance was assisted by a
strong domestic market, where demand for broilers is growing at an
average 5% a year. Daybreak contributed R347 million to turnover and
R41,1 million to profit before interest and tax. Since the year-end, the
board of directors has approved a R410 million expansion project for
Daybreak to increase its production capacity by 100%.
The Group`s financial performance also benefited from the decision to
exit the under-performing and high-risk cotton ginning business.
AFGRI declared a total dividend of 30,0 cents for the 2007 financial
year, up 53,8% from the 19,5 cents normal dividend paid in 2006
Looking forward, Wright says the current year will be a challenging one
for AFGRI in the light of the poor rains across much of the country and
the resultant reduction in the maize crop estimate for the 2007 season.
Maize prices have firmed since 2006 due to a weaker rand and stronger
international demand for corn (maize) from ethanol producers,
particularly in the US. These higher maize prices will benefit AFGRI`s
Producer Services and Financial Services businesses, but the smaller
domestic maize crop will have a negative impact on the Handling & Storage
business. It will also exert margin pressure on the Animal Feeds and
Broiler businesses.
"The emphasis in the year ahead will be on more efficient procurement and
improved management of supply chain logistics to mitigate the effects of
higher maize prices in those parts of the business that are sensitive to
escalating prices," says Wright.
Wright further states that the Board has decided to evaluate a separate
listing for the Products business. This evaluation will be carried out
during the next six months and, if it concludes value will be unlocked
for shareholders, a recommendation will be made to shareholders.
Despite the challenging conditions that lie ahead, AFGRI remains
confident of achieving positive earnings growth in the coming financial
year.
ISSUED FOR: AFGRI LIMITED
CONTACT: Jeff Wright, Managing Director:
011 549 0606 / 082 806 1284
Dominic Sewela, Deputy Managing Director:
011 549 6000 / 083 625 2280
De Wet Goosen, Financial Director:
011 549 0602 / 082 770 7859
FAX NO: 011 463 4139
E-MAIL: jwright@afgri.co.za; dsewela@afgri.co.za;
idgoosen@afgri.co.za
WEBSITE: www.afgri.co.za
ISSUED BY: Letsema Communications
CONTACT: Tish Stewart 011 442 5536 / 082 443 6399
FAX NO: 011 442 5536
E-MAIL: tishstewart@mweb.co.za
DATE: 16 May 2007
Date: 16/05/2007 11:51:01 Produced by the JSE SENS Department.
