| Tue 11 Sep 2007, 7:00 | | CRM - Ceramic Industries Limited - Reviewed prelim |
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CRM
CRM
CRM - Ceramic Industries Limited - Reviewed preliminary financial results for
the year ended 31 July 2007
CERAMIC INDUSTRIES LIMITED
(Reg No 1982/008520/06)
Incorporated in the Republic of South Africa
("Ceramic" or "the Group")
Share code: CRM ISIN: ZAE000008538
Reviewed Preliminary Financial Results for the year ended 31 July 2007
Condensed Group income statement
for the year ended 31 July
% 2007 2006
Change (Reviewed) (Reviewed)
R000`s R000`s
Revenue 26,7 1 375 448 1 085 180
Tiles 21,0 1 107 005 914 504
Sanitaryware 57,3 268 443 170 676
Operating profit before 13,1 399 611 353 320
depreciation
Depreciation 13,3 (103 688) (91 504)
Operating profit 13,0 295 923 261 816
Tiles 13,0 233 776 206 883
Sanitaryware 13,1 62 147 54 933
Finance income 25 784 21 939
Finance expenses (12 280) (10 446)
Profit before taxation 13,2 309 427 273 309
Taxation 4,4 (92 464) (88 590)
Profit after taxation 17,5 216 963 184 719
Share of loss in joint - (225)
venture
Profit for the year 17,6 216 963 184 494
Attributable to:
Minority shareholders 639 (1 255)
Ordinary shareholders of 16,5 216 324 185 749
the Group
Weighted average number of 17 285 17 285
shares in issue (000`s)
Basic earnings per share 16,5 1 251,5 1 074,6
(cents)
Headline earnings per share 15,7 1 250,0 1 080,7
(cents)
Dividend per share (cents) 25,9 340,0 270,0
Reconciliation of headline earnings
for the year ended 31 July
2007 2006
% (Reviewed) (Reviewed)
Change R000`s R000`s
Profit attributable to ordinary 216 324 185 749
shareholders of the Group
Profit on disposal of property, (522) (3 986)
plant and equipment
Impairment of investment in 255 -
subsidiary
Foreign gain - liquidation of - (31)
subsidiary
Foreign loss - conversion of loan - 2 821
to share capital
Loss on disposal of subsidiary - 2 245
Headline earnings 15,7 216 057 186 798
Condensed Group balance sheet
at 31 July
2007 2006
(Reviewed) (Reviewed)
R000`s R000`s
ASSETS
Non-current assets 815 580 634 272
Property, plant and equipment 808 456 630 494
Goodwill 4 520 991
Deferred taxation assets 2 204 787
Payment in advance 400 2 000
Current assets 564 018 519 300
Inventories 96 473 90 415
Trade and other receivables 272 446 186 162
Cash and cash equivalents 195 099 242 723
Total assets 1 379 598 1 153 572
EQUITY AND LIABILITIES
Equity 1 011 553 846 246
Share capital 64 962 64 962
Shares held by share trust (105 034) (84 811)
Share awards reserve 5 014 3 354
Reserves 73 089 44 961
Retained earnings 967 401 809 757
Ordinary shareholders` interest 1 005 432 838 223
Minority shareholders` interest 6 121 8 023
Non-current liabilities 75 588 71 700
Shareholders` loans 9 918 16 628
Deferred taxation liabilities 56 543 49 239
Borrowings 9 127 5 833
Current liabilities 292 457 235 626
Trade and other payables and 243 311 179 092
provisions
Income taxation payable 48 983 56 391
Shareholders for dividend 163 143
Total equity and liabilities 1 379 598 1 153 572
Condensed Group statement of changes in equity
for the year ended 31 July
2007 2006
(Reviewed) (Reviewed)
R000`s R000`s
Balance at beginning of year 846 246 745 289
Net additional shares acquired by (20 223) (18 624)
share trust
Share awards reserve 2 235 1 868
Share awards delivered (575) 83
Profit attributable to ordinary 216 324 185 749
shareholders of the Group
Movement in foreign currency 24 852 8 900
translation reserve
Movement in minority shareholders (1 902) 7 861
Transfer to dividend reserve (58 680) (46 618)
Dividend reserve 58 680 46 618
Net dividend paid (55 404) (84 880)
Balance at end of year 1 011 553 846 246
Condensed Group cash flow statement
for the year ended 31 July
2007 2006
(Reviewed) (Reviewed)
R000`s R000`s
Operating activities
Profit before taxation adjusted for 409 247 360 924
non-cash items
Changes in working capital (28 123) (21 264)
Cash generated from operations 381 124 339 660
Finance income 25 784 21 905
Finance expenses (12 280) (10 440)
Dividends paid (55 384) (84 856)
Taxation paid (100 574) (68 233)
238 670 198 036
Investing activities (269 670) (124 281)
Property, plant and equipment (net) (255 008) (99 960)
Acquisition of additional investment (14 662) -
in subsidiary
Net cash proceeds on disposal of - 1 568
subsidiary
Net cash paid to acquire subsidiary - (25 889)
Financing activities (16 624) (22 920)
Cash outflow from share trust (20 798) (18 624)
dealings
Borrowings raised/(repaid) 3 294 (4 303)
Shareholders` loans raised 880 7
Net movement in cash and cash (47 624) 50 835
equivalents
Cash and cash equivalents at 242 723 191 888
beginning of year
Cash and cash equivalents at end of 195 099 242 723
year
Commentary
Ceramic Industries experienced continued strong demand for both tiles and
sanitaryware in the year under review. Despite a slightly weaker currency,
selling prices remained under pressure because of imports, especially from
China.
The Group invested over R250 million to increase capacity and enhance
efficiencies in all operations. Two new kilns were commissioned at the Pegasus
factory and a new bath factory, Aquarius, was commissioned in Krugersdorp.
Record production and sales volumes were achieved once again, primarily as a
result of doubling the installed capacity at Pegasus.
Financial results
Revenue increased by 26,7% to R1 375 million (2006: R1 085 million). Revenue
from tiles increased 21,0% to R1 107,0 million (2006: R914,5 million) and was
driven mainly by increased capacity at Pegasus and a revenue increase in excess
of 40,0% at Centaurus, the Group`s Australian operation. With increased sales
and higher selling prices, this operation increased its contribution to Group
profits. In South Africa the average selling price of tiles increased by 4,1%.
The inclusion of Sphinx for the full year together with the increased sales at
Betta resulted in sanitaryware revenue growing by 57,3% to R268,4 million (2006:
R170,7 million). Sanitaryware prices were reduced in the financial year because
of highly competitive market conditions.
Operating performance at Samca 1 remained disappointing, and Pegasus encountered
inefficiencies while the third and fourth kilns were being commissioned. Costs
were contained across the other factories, with unit costs increasing by less
than the inflation rate despite large increases in packaging and glaze costs.
Although Centaurus increased revenue, its contribution to revenue lagged this
increase. The inclusion of Sphinx, which operates at lower margins than the
Group`s other activities, skewed the sanitaryware division`s margins. The issues
surrounding these operations meant that the benefits of the increased revenue
did not flow through to operating profit, which increased by 13,0% to R295,9
million (2006: R261,8 million).
In February 2007, the Group acquired an additional 5% shareholding in National
Ceramic Industries Australia Pty Ltd (Centaurus) for an amount of AUD 2,6
million. The Group now owns 92,7% of Centaurus.
Headline earnings and headline earnings per share increased by 15,7% on 2006 to
R216,1 million (2006: R186,8 million) and 1 250,0 cents (2006: 1 080,7 cents)
respectively.
Segmental information
Year ended Year ended Increase
31 July 31 July %
2007 2006
Revenue (R million)
Tiles 1 107,0 914,5 21,0
Sanitaryware 268,4 170,7 57,3
Sales volumes (millions)
Tiles (m2) 31,7 28,1 12,8
Sanitaryware (pieces) 1,568 1,244 26,1
Operating profits (R millions)
Tiles 233,8 206,9 13,0
Sanitaryware 62,1 54,9 13,1
Current assets have increased in the current year by the inclusion of deposits
on capital equipment of R47 million in trade and other receivables. The increase
in trade and other payables is largely the result of the capital expansion
programmes.
Cash flow from operating activities for the financial year increased by 20,5% to
R238,7 million (2006: R198,0 million). Primarily as a result of capital
expenditure totalling R258,6 million (2006: R100,0 million), cash and cash
equivalents decreased by R47,6 million to R195,1 million (2006: R242,7 million)
at year end.
The net asset value per share increased by 19,5% to 5 852 cents from 4 896
cents.
Manufacturing operations - tile division
Pegasus
The Pegasus factory, after doubling capacity from 9,2 million m2 to 18,0 million
m2 per annum, is a globally competitive red-bodied tile plant in terms of
capacity, cost of production and technological sophistication. Pegasus is
positioned to compete head on against Chinese imports, with a higher quality
product that is competitively priced.
The factory produced 13,0 million m2, up from 8,7 million m2 in 2006. Production
of a new 43 cm x 43 cm tile format has commenced to meet the demand for larger
tiles.
Vitro
Vitro, which produces full-bodied glazed, extruded punched tiles for the up-
market domestic and contract sectors, produced a solid performance by focusing
on high quality, fashionable products. Although operating at full capacity, the
factory showed a marginal increase in production from 5,5 million m2 to 5,6
million m2 through reduced downtime and waste, with a small reduction in unit
costs.
Samca 1
Samca 1 manufactures pressed glazed floor tiles and is the sole local producer
of 50 cm x 50 cm tiles. The factory delivered a disappointing performance, with
output decreasing to 6,5 million m2 from 6,7 million m2 in 2006, as production
was halted for twenty days for maintenance and the installation of a new spray
drier to restore the plant to required standards. The factory is expected to
produce an improved performance in the year ahead.
Samca 2
The Samca 2 factory, which produces pressed glazed wall tiles, matched the
previous year`s production of 6,8 million m2. In keeping with consumers`
increasing demand for fashionable tiles, Samca 2 has focused on continuous
development of new ranges and has proved its ability to track changing trends.
During the year the 25 cm x 40 cm wall tile format was reintroduced and was well
received in the market.
Centaurus - Australia
Centaurus, which manufactured 3,4 million m2 of premium quality glazed porcelain
floor tiles in Australia, achieved a 10% share of the Australian market by the
end of the financial year. Centaurus` distinctive product is now well
established in Australia and minimal quantities of this product were imported
into South Africa.
A project to double capacity by installing a second kiln and associated
equipment will be commissioned in September 2007. This expansion will deliver
cost benefits and the opportunity to further increase market share in Australia.
Manufacturing operations - sanitaryware division
Betta
Betta manufactures a broad range of vitreous china sanitaryware. Production was
stable at 1,4 million pieces, which fell short of expectations. Increased sales
volumes were offset by price reductions to counteract aggressive competition
from Chinese imports. Continued focus on efficiencies and cost containment paid
off, with a minimal increase in unit costs and a further improvement in yields.
The R100 million expansion programme will be completed in February 2008,
increasing capacity to 2,0 million pieces per annum, and will provide Betta with
the ability to supply exclusive products which are increasingly being demanded
in the market. Economies of scale inherent in the larger manufacturing facility
will allow Betta to become more cost competitive.
Sphinx
Sphinx, which manufactures free standing and customised acrylic baths, reported
a marginal improvement in performance although production was lower than
anticipated. In line with consumers` demands for exclusivity, the factory
focused on broadening its product offering during the year.
Aquarius
Aquarius, the new automated, high-volume, low-cost acrylic bath production
facility adjacent to Betta, was commissioned in July 2007. With an annual
capacity of 200 000 pieces, and underpinned by the government`s housing
programme, the factory is set to make a positive contribution to Group results.
Black Economic Empowerment ("BEE")
The Board is in the process of finalising proposals regarding the implementation
of its BEE initiative. A further announcement will be made by the end of October
2007.
Prospects
After a year of substantial capital investment to increase capacity to satisfy
demand, Ceramic Industries will focus on consolidating its operations and
ensuring that all factories are operating at full capacity in the forthcoming
year. Cost containment and economies of scale should counteract margin pressure
presented by imported products. Capital expenditure in the forthcoming year will
be limited to projects to further improve product quality and fashion. The
Group continues to evaluate the need to establish a new floor tile factory,
Gryphon, should growth in demand continue on current trends.
The increase in installed capacity will create opportunities to export products,
particularly from Betta, Aquarius and Centaurus.
The Group expects the demand for tiles and sanitaryware to continue into the
next financial year. With this demand and the additional capacity the Group
expects to deliver real growth in earnings in 2008.
Dividend
The Board has declared a final dividend of 200 cents, which, together with the
interim dividend of 140 cents, produces a total dividend of 340 cents per share
(2006: 270 cents per share), an increase of 25,9%. Dividend cover has reduced
marginally to 3,7 times.
On behalf of the Board
G A M Ravazzotti N Booth
Chairman Chief Executive Officer
Dividend announcement
The Board has declared a final dividend (No 35) of 200 cents per ordinary share
to all shareholders recorded in the books of Ceramic Industries Limited at the
close of business on Friday, 12 October 2007. The last day to trade cum dividend
in order to participate in the dividend will be Friday, 5 October 2007. The
shares will commence trading ex dividend from the commencement of business on
Monday, 8 October 2007 and the record date will be Friday, 12 October 2007. The
dividend will be paid on Monday, 15 October 2007. Share certificates may not be
rematerialised or dematerialised between Monday, 8 October 2007 and Friday, 12
October 2007, both days inclusive.
On behalf of the Board
E J Willis
Secretary
6 September 2007
Review of external auditors
The condensed consolidated financial statements for the year ended 31 July 2007
have been reviewed by our auditors, KPMG Inc.
Their unmodified review report is available for inspection at the registered
office of Ceramic Industries Limited.
Accounting policies
The annual financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as well as the South
African Companies Act and are consistent with the accounting policies applied in
the previous financial year.
Directors: G A M Ravazzotti (Chairman),
N Booth (Chief Executive Officer),
S D Jagoe, E M Mafuna, L E V Ravazzotti, K M Schultz,
G Zannoni (Italian)
Registered office: Farm 2, Old Potchefstroom Road,
Vereeniging
PO Box 2247, Vereeniging, 1930
Transfer secretaries: Computershare Investor Services 2004
(Pty) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Date: 11/09/2007 07:00:02 Produced by the JSE SENS Department.
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