| Fri 15 Feb 2008, 15:06 | | AGI - AG Industries Limited - Trading Statement |
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AGI
AGI
AGI - AG Industries Limited - Trading Statement
AG INDUSTRIES LIMITED
(Incorporated in the Republic of South Africa)
Registration Number: 1980/004051/06
SHARE CODE: AGI
ISIN: ZAE000039467
("AGI" or "the Group")
TRADING STATEMENT
INTRODUCTION
The Group is currently finalising its results for the six months to 31 December
2007. As outlined at the Group`s annual results in September 2007 and in the
Group`s 2007 Annual Report, operational issues at the Group`s Roodekop
manufacturing facility were set to continue impacting on Group results until the
year-end results of 2008.
Although profitability in the six months to 31 December 2007 improved with a
reduction in the headline loss per share of between 70% and 75% from the six
months ended 30 June 2007, shareholders are advised that the anticipated
earnings and headline earnings per share for the six months to 31 December 2007
will be 110% to 115% lower than the results of the six months to 31 December
2006 ("the previous corresponding period").
OPERATIONAL
LOCAL DIVISION
GLASS
This division represents 38% of the Group`s revenue and remains a consistent
performer.
* Unbeneficiated products (wholesale distribution of bulk and cut to size
glass) traded satisfactorily, with revenue increasing by 0,3% (2006: 8,2%).
This was in line with expectations, as the Group`s strategy is to maintain
its share of the market within this competitive segment instead of chasing
volumes. This division encountered elements of price competition from
importers. This, together with a consistent overhead to revenue ratio,
resulted in a marginally reduced operating margin.
* Value Added Glass` revenue increased by 17,5% (2006: 2,9%) with a marginal
increase in volumes as a result of the revenue mix shifting towards
servicing the commercial market which has higher selling prices. The
results were achieved against a further slowdown in the residential market,
which was predominantly offset by the continuing upturn in the commercial
market. Start-up costs and under-recoveries in manufacturing equipment in
the new facilities in the Eastern Cape and Roodekop impacted operating
margins in this division. However, as volumes increase in the commercial
market, margins are expected to improve.
SHEERLINE
This division represents 12% of the Group`s revenue.
Sheerline traded satisfactorily, with revenue increasing by 14,3% (2006: 20,0%).
Volatility in commodity prices and cheaper imports of aluminium extrusions from
China put pressure on selling prices. This, together with an increase in the
overhead to revenue ratio in the current reporting period due to the expansion
of this division`s geographic footprint through the opening up of several new
branches in the latter part of the previous financial year, resulted in a
decrease in operating margin..
ALUMINIUM
This division represents 42% of the Group`s revenue.
As mentioned in previous announcements and the Annual Report 2007, the Group
results were materially impacted by operating problems at AGI`s wholly-owned
Roodekop manufacturing facility. These problems had a significant impact on
revenues and operating margins from January 2007 onwards.
During the six months to December 2007, revenues in this division decreased by
14,1% (increase 2006: 23,2%). Whilst the operating margins will be significantly
lower than the six months to December 2006, the operating margin has
significantly improved on the prior six months to June 2007.
* FINISHED GOODS
Revenues decreased by 11% (2006: 10%) and operating margins decreased
compared to the previous corresponding period. However, when compared to
the prior six months to June 2007, revenues in this division increased by
1% and operating margins improved significantly following a restructuring
drive to improve productivity and efficiencies. This resulted in this
division returning to profitability.
* ROODEKOP
Revenues decreased by 18% (2006: increase 117%) after once off intercompany
revenues of R69.8 million in the six months to December 2006 as a result of
movements of stock due to the restructure within this division. Had these
stock movements not taken place in the previous corresponding period,
revenues for the six months to December 2007 would have increased by 30%
(2006: 37%).
Both gross and operating margins were severely impacted by the production
setbacks at Roodekop. However, despite a strike in July and further press
breakdowns, particularly in August, steady capacity and productivity
improvements were made throughout the rest of the period following
corrective action plans taken during the current reporting period. The
planned replacement of the problematic aluminium billet heater and shearer
was successfully completed over the December 2007/January 2008 shutdown. As
a consequence, the second extrusion press is finally able to operate at its
required production capacity. Production from the presses is currently
running at around 90% of the planned production targets.
Operating losses were reduced to R13,7 million for the current period from
R39,4 million in the immediate prior six month period.
INTERNATIONAL DIVISION
This division represents 8% of the Group`s revenue and experienced continued
growth.
The trading operations in Germany, United Kingdom and Mauritius reported record
operating profits for the period, growing revenues by 8,5% (2006: 1,2%) and
improving operating margins. The division as a whole had a marginal drop in
operating margin as a result of the start-up costs of approximately R1,0 million
incurred in the opening of a trading office in South East Asia.
GENERAL
Although the interest charge in the current reporting period will be between 80%
and 85% above the previous corresponding period, the proceeds of R163,0 million
from the disposal of the Roodekop property received on 12 December 2007 will
reduce gearing and finance charges during the second half of the 2008 financial
year.
Detailed information with regard to the Group`s operations and its prospects for
the 2008 financial year will be furnished in the Group`s interim results
announcement which will be published on SENS on or about 3 March 2008. The
financial information on which this trading statement is based has not been
reviewed or reported on by the Group`s auditors.
Johannesburg
15 February 2008.
Sponsor: Sasfin Capital
A Division of Sasfin Bank Limited
Date: 15/02/2008 15:06:02 Produced by the JSE SENS Department.
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